The UK Prime Minister Boris Johnson is set to resign as Conservative party leader but will stay as Prime Minister until a successor is in place. Will it affect the UK economy?

When the Chancellor of the Exchequer and Secretary of State for Health announced their resignations, the pound fell against the dollar.

Dermot O'Leary, Chief Economist with Goodbody, said in normal economic circumstances, political shenanigans as seen over the past 24 hours wouldn't have too much of an impact because households and businesses would just get on with it.

"But of course, we are not in normal economic times and key decisions would have to be made by the UK government over the next three to four months and this political uncertainly potentially impacts on those."

He points to the fiscal measures that will need to be introduced to deal with the real income squeeze in the UK; the Northern Ireland protocol, and energy security issues for the UK economy this winter.

"The bottom line is that you need a stable government to implement policies for those, so that's where it's relevant rather than in market movement over the last couple of days," Mr O'Leary said.

Separately, the Central Bank of Ireland has warned that inflation could peak in the coming months at over 10% but should start to decline after that.

The US Federal Reserve takes a more pessimistic view, flagging concerns that inflation could become a permanent fixture.

Mr O'Leary said the Central Bank has brought down its forecast for growth but very modestly and it is still looking at growth of over 4% in modified domestic demand in 2023.

"We'd have a more pessimistic view, mainly because we would be more pessimistic on the real income squeeze for Irish consumers because of inflation," he said.

"This is a theme globally," he said.

"I think we could possibly see downside risks to those forecasts from the Central Bank. I would particularly point out, when you look across the Atlantic, we are heavily dependent on the US and we are starting to see signs of a slow down there led by what the Federal Reserve is doing, raising interest rates to slow down their economy," the economist added.