The Central Bank’s 2024 Annual Report & Performance Statement

We published our Annual Report and Annual Performance Statement for 2024 today. It’s an important moment each year when we set out how we have delivered on our mandate for the people of Ireland.

We find ourselves facing into a period of both challenge and opportunity for the Irish economy, against an uncertain international backdrop. The global geopolitical landscape faces significant strain and complexity, driven by competing interests, shifting alliances with different values and increasingly independent economic blocs.

I would like to use this blog to give an overview of the economic outlook, summarise our achievements in 2024 and provide an update on our financial position at the end of 2024. 

Economic outlook: navigating uncertainty

Over the course of 2024, the global, euro area and Irish economies saw inflation falling and monetary policy adjusting accordingly. My colleagues and I on the ECB’s Governing Council remain focused on reducing inflation to its 2 per cent target over the medium term. Looking back at last year, we reduced rates by 100 basis points as inflationary pressures continued to ease and it became clearer that there would be a gradual convergence of inflation to our 2 per cent target during 2025.

The Irish economy performed strongly in 2024 and entered into the turbulence of early 2025 in a position of strength. Our assessment was that the steady expansion of the economy would continue over the next three years, albeit at a slower rate. Unemployment was low, at around 4.5 per cent, inflation had come down substantially and the headline fiscal position was relatively strong, all of which pointed to the economy carrying strong momentum into the rest of 2025.

However, since the turn of the year, we have seen three interrelated shocks affecting the international economy (trade policy shifting, policy uncertainty and increased market volatility). The combination of these factors has led to a downgrading of global and domestic growth projections. Ireland is particularly exposed to these global headwinds and is facing into a period which will be defined by uncertainty. Our economic policy needs to be calibrated carefully to navigate the rapidly shifting geoeconomic changes. In particular, there needs to be a focus on enhancing our long-term economic resilience and addressing some of the underlying vulnerabilities in the domestic economy (something which Deputy Governor Madouros recently spoke about in relation to Ireland’s fiscal position and domestic capacity constraints).

The Central Bank 2024

Turning to our Annual Report, it contains many highlights including:

• Implementing changes to our Fitness and Probity regime and setting up a new Fitness and Probity team. This enables us to improve our processes, benefiting the firms we regulate while continuing to maintain our standards
• The work to design a new integrated approach to regulation and supervision which recognises the interrelated and interconnected nature of the risks facing the financial system. It leverages  our broad mandate, focussing on our safeguarding outcomes;
• The launch of our Innovation Sandbox focusing on combatting financial crime
• Our analytical work on housing and the work on a number of key policy objectives in the area of macro-prudential policy, including our approach to macro-prudential policy for investment funds and new measures for Liability Driven Investment Funds

Contributing to the development of Ireland’s National Payment Strategy in conjunction with the Department of Finance, and to the Eurosystem’s work on the preparatory phase for the Digital Euro project.

Challenges to profitability

Our financial position remains robust, despite the losses that we incurred as a result of the necessary monetary policy actions to achieve price stability. Prior to the use of any provisions, the Central Bank recorded a loss, like a number of other central banks across the world, of €795.4m in 2024.  Similar to last year, this result was due to the exposures arising from the use of the Central Bank’s balance sheet as a tool for monetary policy (reflecting our mandate to safeguard price stability).

I mentioned in my blog last year (on the 2023 Annual Report) that the Central Bank’s role was not to make profits. Our mission is to serve the public interest by maintaining monetary and financial stability, while ensuring that the financial system operates in the best interests of consumers and the wider economy.  Of course, we make income through our operations which we use to cover our operating expenses and – where needed – to invest prudently in building our long-term financial and operational resilience.  Any surplus income is then transferred to the Exchequer.  

The monetary policy losses are a result of the Eurosystem’s decision to purchase government bonds during the period of below-target inflation, which have exposed its member central banks to interest rate mismatches. On the asset side of the balance sheet are longer-dated fixed-rate holdings under our policy purchase programmes that were acquired at low or negative interest rates. But the interest rates on the related liabilities are tied to the ECB’s (variable) monetary policy rates. As we raised rates to tackle inflation, our funding costs for the liabilities rose relative to the income received on the related assets which has resulted in losses. This is likely to be repeated in 2025 (and potentially beyond) but we expect any losses to be covered by our financial buffers (although the ultimately size of losses will depend on many factors, not least the monetary policy decisions made by the ECB’s Governing Council to ensure price stability).

Conclusion

The Annual Report is of course a snapshot in time as we continue to manage the rapidly changing financial services ecosystem in Ireland.  None of what we do would be possible without the people who work here.  Our strategy continues to be aimed at enabling our organisation to be more agile, resilient, diverse and intelligence-led, better anticipating (and responding to) the profound changes underway within the economy and financial system. We want to strengthen public trust and understanding of the Central Bank’s role and purpose and our latest Annual Report sets out what we achieved last year.