THE CENTRAL BANK of Ireland today released the first Financial Stability Review (FSR) of 2022 which has shown how the war in Ukraine has put pressure on financial markets around the world, including our own.

The FSR outlines key risks facing the financial system and the Central Bank’s assessment of the resilience of the economy and financial system to adverse shocks.

The review found that following a rapid economic recovery from the pandemic, Russia’s invasion of Ukraine has led to “lower global growth expectations and intensified inflationary pressures”.

The stability review showed that price pressures coupled with a tight labour market point to emerging pressures in certain sectors, including the housing market.

Governor of the Central Bank, Gabriel Makhlouf, said the latest review comes following a series of shocks to the economy in sequence.

He said: “The invasion of Ukraine by Russia is first and foremost a human and societal tragedy for the people of Ukraine. This horrific war has amplified many risks around the world, and inflation is now running at the highest levels seen in four decades in many developed economies, including here in Ireland.”

He explained: “It is this inflationary environment – and the range of unprecedented and unexpected shocks to have hit the global economy in recent years – which forms the key backdrop to our risk assessment in June 2022.

The world is now a more uncertain place than it was only six months ago. In this context, forward-looking judgements around the evolution of the macro-financial environment are particularly challenging.

On the resilience of the Irish economy itself, Governor Makhlouf said households and businesses in Ireland continue to have important capacity to cope with these risks and are in a better position to absorb shocks when compared to the onset of the post-2008 crisis.

In relation to the resilience of the banking sector, the Governor added that retail banks are in a position to absorb negative shocks without adverse knock-on implications for consumers or the economy.