The Governor of the Central Bank, Philip Lane, said there will be more volatility in financial and currency markets as the process of Britain's leaving the European Union continues.
He warned that harder versions of Brexit were likely to be associated with more substantial reassessments of growth prospects and asset prices in both the UK and the EU.
He described Brexit as "a disruptive event that has adverse implications for both the UK and EU economies", and said the focus of policymakers has to be on negotiating a new UK-EU settlement that can allow both the UK and EU to prosper over the long run.
Last week the Central Bank cut its Irish growth forecast for next year from 4.2% to 3.6%, and warned of further downside risk as a result of Brexit.
Speaking at an event in the margins of the IMF annual meetings in Washington, Mr Lane said the recent fall of sterling against the euro was in part just an unwinding of the sustained rise of sterling that happened between 2013 and 2015.
He said the fall of sterling was one of three things that helped cushion the international and UK Banking systems against the outcome of the Brexit referendum, calling it an "important stabilising mechanism" in dealing with the adverse implications of Brexit to Britain's terms of trade.
Moves by the Bank of England and other central banks to ensure commercial banks would have enough liquidity, and the widespread understanding that the Central Banks were ready to take other actions in the wake of the referendum also helped stability.
He said the broad decline in euro area bond yields "might be attributed to beliefs that Brexit could represent a headwind for recovery in the euro area, prolonging the phase of accommodative monetary policy". The prospect of slower growth and "lower for longer" interest rates help to explain the fall in bank share prices since the Brexit vote.
He told the meeting that Brexit underlines the urgency of making progress in creating a European Capital Markets union.
He said that the longer term EU-UK relationship will make it harder to rely on London as a location for euro-denominated capital markets activity, fostering scale economies and harmonisation in the EU financial system is essential in order to develop the deep and liquid euro-denominated markets that are required if the EU is to reap the benefits from a more balanced financial system, in which the availability of equity and bond funding provides an important alternative to bank-sourced funding for corporate.
Addressing London financial firms thinking of moving to Dublin or other EU centres to continue accessing the single market, the Governor pointed out that all Euro Area banking operations are regulated directly by the ECB, so there was no regulatory advantage in choosing one country over another.
He said firms should instead look at the other determinants of location choice, such as availability of skilled labour, office and housing supply, infrastructure, legal and tax systems and "quality of life" indicators.