Prepare for rising interest rates and price inflation, Varadkar warns

Tánaiste and the Minister of Business, Leo Varadkar, have said that the Republic must be prepared for an interest rate hike that could make the huge loans of the State more expensive for the pandemic.

He said that the state is “beaten” by a period of price inflation, which could be followed by higher interest rates. In an interview with The Irish Times, Varadkar said he “fears” the impact of inflation on the Irish economy, especially if the cost of borrowing rises.

“It has been so long since we experienced it that we are behind schedule. We have to prepare for this possibility and interest rates go up as a consequence. I don’t think there are enough economists talking about this. With so much quantitative easing, government borrowing and low interest rates for so long, it has to be on our risk register, “he said.

Inflation concerns

Finance Minister Paschal Donohoe recently issued a similar warning.

However, several economists do not share his concerns. Dermot O’Leary, chief economist at Goodbody Stockbrokers, said current concerns about inflation in global markets are related to the United States and the ramifications of its $ 1.9 trillion stimulus plan. “Even the European Central Bank believes that inflation in the euro zone will stay within the 2 percent long-term target,” he said.

Austin Hughes, chief economist at KBC Ireland, said a modest dose of inflation could help Ireland with debt sustainability. “A little inflation would be a good thing,” he said.

Talent and mobility

Meanwhile, addressing the Employment Bar Association conference on the post-Covid world of work, Mr. Varadkar said there was a danger that cities could be ’emptied’ by large-scale work from home or fixes. ” combined “after the pandemic.

Such a development could lead the Republic to lose talented mobile workers to other countries, he suggested.

“We don’t want our cities to empty out. Dublin, Cork, Limerick, Waterford and Galway will compete with Barcelona, ​​Liverpool, Paris and Lisbon in the battle for talent. And talent can work remotely from almost anywhere, so our cities must be vibrant places where talent wants to live, ”he said.