Dr. Gillian Phelan:

Generally, from the literature, the drivers of inequality are largely structural rather than cyclical. As has been said with regard to monetary policy tightening, we have rates increasing so essentially there is a redistribution there. It is bad for borrowers but good for savers when interest rates go up. We know also that a downturn is like when the tide goes out in that it lays bare a lot of the inequalities that were structurally there already. Overall in terms of thinking about monetary policy and the effect it has on the economy in the long term, we generally think of it from an economist's perspective. We talk about the general equilibrium effect. The best impact monetary policy can have in terms of inequality is actually achieving its mandate. It is having price stability, having inflation at 2%, ensuring the right conditions for growth and investment and having supply and demand back in balance. They would be the main concerns around the interrelationships between monetary policy and inequality. It works both ways. There are also implications for monetary policy decision-making in terms of inequality as well so the relationship goes both ways.

On the capping of interest rates, Dr. Kelly talked a little about this. Interest rates are for sure the main tool and anything that caps rates would slow that pass-through into the economy. It would slow that transmission of monetary policy and it would slow the reduction of inflation in Ireland. We are back to the comment from before about the relativity between Ireland and the rest of Europe becoming problematic. Of course, there are effects on competition and things like that as well but more fundamentally, perhaps, the public authority in a way would be replacing the core function of risk management, which is the function of the banking sector.

That is something we would have to think very carefully about.