Economic Analysis

Economic picture has been robust in the face of geopolitical shocks.

De-escalation of Middle East War has driven relief rally for markets. 

US economy continues to outperform, with Eurozone and UK dented by higher energy prices and political uncertainty.

The July meeting of the ECB's Governing Council saw the central bank leave its key interest rates unchanged. The deposit and refi rates were maintained at 2.25% and 2.40%, respectively. This was very much in line with market expectations. The decision to remian on hold was unanimous.

The June policy setting meeting of the Bank of England's Monetary Policy Committee (MPC), saw the central bank leave the Bank Rate unchanged today, at 3.75%.

The June meeting of the Federal Reserve Open Market Committee (FOMC) saw the central bank leave interest rates unchanged. The target range for the Fed funds rate was maintained at 3.50–3.75%, for a fourth consecutive meeting. The decision to leave rates on hold was unanimous, and it was in line with market expectations.

The manufacturing PMI rose to 55.9 in May, amid gains in output, new orders and exports. The services PMI rebounded to 50.8 in May. New car sales remained strong, rising 5.4% year-on-year in the three months to May. Mortgage approvals increased 2.8% year-on-year in the three months to May. House prices were unchanged in April after a weak start to 2026. Consumer prices fell 0.1% in May, mainly due to lower entertainment and energy costs. The unemployment rate averaged 4.7% in 2025 and rose modestly to 5.0% in Q1 2026.

The global economy started 2026 on a strong footing. Indeed, US tariffs have not escalated to the extent expected post ‘Liberation Day’ in April 2025, and some measures were struck out, at least temporarily, by the US Supreme Court in early 2026. A key driver of this resilience has been the surge in AI-related investment, particularly in the US. 

Foreign Currency and Interest Rates from 2025

The Irish residential property market remains defined by tight supply as 2025 draws to a close. However, over the course of the year, there have been some encouraging signs in the suppy dynamics, albeit the outlook remains challenging. 

This Budget is set against an uncertain economic backdrop so far this year. GDP growth was robust in the early part of the year but has since moderated. The Chancellor had committed to not raising taxes materially further following last year’s hikes to national insurance (NI) on employer contributions, which among other measures raised £40bn. While the tax rises are largely to fill the hole in the fiscal rules, there are also net spending increases in the budget