Irish inflation should fall below 3 per cent by year end, bringing it more in line with other eurozone countries, according to the Governor of the Central Bank.
Speaking at the launch of the bank's annual report, Mr John Hurley said it had been speaking about the inflation issue "for some time".
"We do need to get inflation back to the eurozone level," he said. Price inflation in other countries is nearer to 2 per cent than Ireland's rate last year of 4.6 per cent.
The bank warned in its report that the country faces issues of deteriorating competitiveness driven by inflation and the rapidly appreciating euro.
On whether there is scope for a further rates cut by the European Central Bank, Mr Hurley said: "By any standards, I think monetary conditions are conducive to growth and investment."
It would be useful to look at what such a cut would bring to growth and to the economy, he said. However, on whether rates would drop further, Mr Hurley said: "Wait and see."
On house prices, the governor said that hopefully the market would begin to stabilise given the number of new units now in place. The bank believed affordability to be "high" given low interest rates, he said.
"It would need a significant external shock to cause a downturn in prices. It's more likely that prices will stabilise," he added.
Mr Hurley also said he would urge that productivity gains be tied in to the benchmarking payments at all levels and not just in the public sector.