Central Bank Governor John Hurley has warned unions and employers against pay rises which would add to inflation.
Mr Hurley told a conference in Dublin that lower productivity growth in the Irish economy would slow growth and make it harder to contain inflation. He called on the social partners to ensure that pay rises 'take due account of productivity developments'.
Unions last week expressed concern that pay rises were not keeping up with inflation, following figures which showed that the rate had averaged 5% in the first few months of the year.
Mr Hurley said Government policies should promote competition, develop infrastructure and foster research and innovation.
Mr Hurley said the euro had brought lower interest rates to Ireland, adding that these had contributed to strong economic growth, but had also led to rapid credit growth and rising house prices.
He later told a panel discussion that he expected 'low single digit' percentage growth in house prices this year.
The Governor also told the conference in Dublin that the European Central Bank has not pre-determined any further action on interest rates.
But Mr Hurley, who is a member of the ECB's Governing Council which decides on rates, reiterated concerns about inflation which suggest that further rises are on the way.
He said a rise in oil prices had meant that an expected dip in inflation in the first half of this year had not taken place, while the rate was expected to rise from September onwards.
The bank raised interest rates to 4% last week, with ECB president Jean-Claude saying the bank's monetary policy was still on the 'accommodative' side. This was seen as a signal that more rises were to come later in the year.
Meanwhile, ECB president Jean-Claude Trichet raised questions about the introduction of an EU common consolidated corporate tax base.
He was responding to a question from Dublin Fianna Fáil MEP Eoin Ryan at a meeting of the economics committee in the European Parliament in Brussels.
Mr Trichet said there were 'enormous differences' in the public finances of different EU countries, and questioned how there could be tax harmonisation when such spending differences existed.
