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Geopolitical developments are being monitored, Ireland cenbank chief says during Cyprus visit

Makis Keravnos, Gabriel Makhlouf, and Constantinos Herodotou

Central Bank of Ireland governor Gabriel Makhlouf on Tuesday stressed the importance of closely monitoring the ongoing geopolitical crisis in the Middle East due to its potential economic implications.

In addition, he acknowledged the human tragedy of the situation but highlighted that it was too early to draw precise conclusions regarding its financial impact.

Makhlouf’s comments were made during a press conference, during his visit to Cyprus this week, at the invitation of the Governor of the Central Bank of Cyprus (CBC), Constantinos Herodotou.

During his visit to the island, Makhlouf held discussions in Nicosia with the Cypriot Minister of Finance, Makis Keravnos, a day after meeting with CBC governor Herodotou.

“It is, of course, primarily a humanitarian tragedy. However, we are closely monitoring the situation because it will undoubtedly have economic consequences to some extent. So, this is an area of focus for us,” Makhlouf explained.

When asked about the potential effects of the crisis in the Middle East on the European Central Bank’s (ECB) monetary policy, Makhlouf emphasised that it was too soon to determine the exact implications.

He noted that central bank governors and policymakers were closely monitoring the situation to better understand its consequences.

“It is too early to jump to conclusions because it affects economic activity in one way or another. But it doesn’t necessarily mean it will have a significant impact,” he stated.

Makhlouf also emphasised the ECB’s current commitment to achieving its primary goal of restoring inflation to target levels.

He mentioned that this focus had been central to the ECB’s efforts in recent months and would continue in the future.

In response to another question about the potential impact of the current crisis on the banking systems in Cyprus and Ireland, Gabriel Makhlouf expressed confidence in the resilience of both countries’ financial systems compared to previous crises.

He attributed this increased resilience to changes in the international regulatory framework and the private efforts of the banking sector to enhance efficiency and effectiveness.

While acknowledging that risks always existed, Makhlouf asserted that the financial systems were currently much more robust.

Meanwhile, CBC governor Herodotou expressed his gratitude for the visit of the Irish central bank governor to Cyprus and highlighted that they were actively exploring ways to formalise and enhance technical cooperation between the Central Bank of Cyprus and the Central Bank of Ireland, further strengthening their cooperative relationship.

Additionally, the two central bankers are also preparing to participate in an upcoming meeting of the ECB’s Governing Council scheduled to take place in Athens on Thursday.

Finally, it was noted that their discussions encompassed various topics, including monetary policy and related developments.

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