Dr. Mark Cassidy:

We are seeing the inversion of the yield curve in the USA. We do not see it in the euro area. Traditionally, an inversion of the yield curve often indicates that markets expert a downturn in the future. They expect that longer-term interest rates will be lower than shorter-term rates. Therefore, at some stage in the future, the Central Bank will reduce interest rates. The Central Bank usually reduces interest rates because economic conditions are bad. The Deputy is right in what she suggests. I am not sure at the moment and think other factors could be behind this. I would not put it down to expectations relating to the economic outlook.

At the moment the expected pace of interest rate rises in the US is very sharp. Unless things divert from the current path there will be a number of interest rate rises in the near term, during 2022, into 2023. It reflects a number of things but as much as anything it may reflect the sharp short-term pace, which will then normalise, rather than the fact that the downturn indicates recession. I couch that with much uncertainty. There are many reasons why a yield curve could be inverted. Many market expectations can be reflected in that. I do not think that is the main reason it reflects.

In regard to the second point, did Deputy Farrell mean the impact if a recession was to happen here or if there was a downturn in the economy, the impact that would have here, or was it more about interest rates?