Interest rates will rise again in March and will end the year three quarters of a point higher than now, Bank of Ireland chief economist Dan McLaughlin has predicted.

Dr McLaughlin said that higher interest rates would not threaten the economy and that consumers were not excessively in debt.

The latest Bank of Ireland report forecasts Gross Domestic Product (GDP) and Gross National Product (GNP) - measures of the volume of goods and services produced in the economy - to rise by 6 per cent this year, their strongest joint performance since 2001.

Dr McLaughlin countered the view that economic growth was dependent on debt.

"Despite much comment, the reality is that the current consumer boom is not fuelled by a debt-driven consumer binge but by income growth. In fact, consumer spending has lagged household income growth for a number of years, implying a rise in the savings ratio."

He said that interest rates as a proportion of income and household deposits remain low.

According to the bank's outlook, the European Central Bank will raise interest rates by three quarters of a per cent over the remainder of the year.

Market expectations are for a quarter per cent rise in March, followed by another in June, but Dr McLaughlin said strong lending growth across the euro zone could prompt the European Central Bank to implement a further quarter point rise before December.

Dr McLaughlin said the only risk to the Irish economy was of a unique economic shock that would not influence other euro zone economies.

He criticised the Government for its "pro-cyclical" budgetary policies - reigning back on government spending during the downturn of 2001 and 2002 and increasing it in later years of strong performance.

"Under this approach the government would have less room for manoeuvre if there was a downturn."

The Bank of Ireland yesterday also announced the issuance of €800 million in securities to institutional investors in the United States.