The Central Bank has warned of the dangers of awarding pay increases to compensate for inflation.
The Bank's Governor, John Hurley, said a rise in wages could add further to the overall cost of living.
Speaking at the launch of the bank's annual report, he said the outlook for the economy remained favourable.
He forecast that this year economic growth will be 5%, and 4% next year.
House prices have fallen by 2% in the first five months of this year after a decade of rapid growth, but the bank says slowdown is good and it does not see a crash on the horizon.
It says property is supported by favourable prospects for employment and incomes.
But the steep decline in the value of the dollar, which will make our exports more expensive, and surging oil prices are threats to growth.
The General Secretary of the Irish Congress of Trade Unions, David Begg, has called on the Government to act by giving more interest rate relief to mortgage holders.
The Minister for Enterprise, Trade and Employment, Micheál Martin, has said there is no question of the Government supporting the award of pay increases to compensate for inflation.
Mr Martin said the Government had already held talks with IBEC, ICTU and the social partners to discuss the difficulties.
He said they agreed to go forward collectively to try and solve the situation and find ways other than pay to deal with these difficulties.
