Central Bank Strategies for 2025: Navigating a Shifting Landscape

 

Key Highlights from Gabriel Makhlouf, Governor, Central Bank of Ireland's Address at the Singapore FinTech Festival

 

Economic Outlook and Inflation:

  • Global inflation is easing, with the Euro area on track to achieve the 2% target by 2025.
  • Managing inflation requires a steady, cautious approach, particularly as services inflation remains elevated.
  • A new normal of economic volatility is expected, driven by global fragmentation, demographic shifts, technological change, and climate challenges.

The Role of Central Banks in a Changing World:

  • Central banks must adapt to a rapidly evolving landscape, marked by events like the global pandemic, geopolitical tensions (e.g., Russia’s war in Ukraine), and rising conflicts.
  • Central banks are navigating an era of unprecedented innovation and complexity.
  • Despite these challenges, fundamental principles like governance, risk management, and consumer protection remain crucial.


  • Technological Innovation in Finance:
    • The financial system is undergoing significant transformation, heavily influenced by technological advancements.
    • Ireland’s financial sector has expanded rapidly, benefiting from EU membership, an open economy, and a skilled workforce.


  • Notable changes include:
    • A fourfold increase in authorised payment firms.
    • The rise of electronic payments and demand for instant transactions.
    • New tech-driven business models, such as partnerships between payment and credit providers.
    • Technologies like blockchain, cloud computing, and enhanced data analytics are reshaping financial services.

Regulatory Approach:

  • The Central Bank of Ireland’s strategy is based on six core principles:
    • Forward-Looking: Anticipating future challenges and opportunities.
    • Connected: Collaborating with peer regulators, industry, and the public.
    • Proportionate: Balancing benefits and risks without compromising key standards.
    • Predictable and Transparent: Providing clarity for regulated entities, even in uncertain times.
    • Agile: Embedding adaptability into everyday operations, not just in crises.


  • Preparing for Future Innovation:
    • The Central Bank is focused on understanding and managing technological advancements to harness their benefits while mitigating risks.
    • Establishing a new sandbox programme to explore financial innovation and improve regulatory approaches.
    • Emphasis on collaboration with global regulators to ensure a balanced and secure financial environment.


  • Upcoming Regulatory Priorities:
    • Implementation of the EU’s Digital Operational Resilience Act.
    • Adopting regulations for crypto-assets under the Markets in Crypto-Assets Regulation (MiCA).
    • Strengthening capabilities in areas like artificial intelligence and tokenisation.


  • Modernising Payments and Digital Currency:
    • Modernisation of cross-border payment systems is essential for efficiency.
    • The digital euro initiative aims to provide a secure, accessible digital form of cash, blending traditional cash benefits with digital convenience.
    • Final decisions on the digital euro will depend on the legislative framework set by European authorities.

 

Conclusion:

  • Central banks must act as stabilising forces during turbulent times, but they must also embrace innovation.
  • Effective regulation and collaboration are key to shaping a resilient financial system.
  • The ultimate goal is a well-regulated financial sector that supports consumers, businesses, and the wider economy while fostering technological advancement.

 Watch Full Session

 

Speaker:

  • Gabriel Makhlouf, Governor, Central Bank of Ireland
 
 

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