The Central Bank governor, Mr Maurice O'Connell, has moved to temper expectations of further cuts in interest rates, warning that existing levels will remain unchanged for some time.
In his most forthright public assessment of the economy, he has also cautioned that a slowdown cannot be "too far off" and has pointed to the dangers of inflation, higher wage levels and excessive house price rises.
Mr O'Connell's comments, in a speech to the Cork Chamber of Commerce, follow warnings by the Organisation for Economic Co-operation and Development as well as the International Monetary Fund that wage rises will have to be held in check if the economy is to continue on an even keel.
According to Mr O'Connell the success of the economy is "very fragile" and domestic policy in relation to costs is now of critical importance. He added that our future was now tied to Europe and recent interest rate cuts instigated by the European Central Bank in Frankfurt - on the governing council of which he sits - are not to the State's short term advantage because of the buoyant economic conditions.
"The prescriptions that are right for the Euro area in general are not ideal for us," he said. "But we cannot have special treatment."
Nevertheless, he said, following the April reduction in interest rates it was a "reasonable assumption" that these would remain unchanged for some time ahead.
Mr O'Connell's predictions were underscored yesterday by his French counterpart, Mr Jean Claude Trichet, who said in an interview that the ECB had created "the best monetary environment" for growth and that financial markets did not expect further interest rate easing. "Any expectation for a further decrease would not be appropriate," he added.
Mr O'Connell said the problems facing us underlined the importance of Britain joining the Euro as soon as possible.
"It would be to our advantage that Britain join the Euro area sooner rather than later. Britain in the Euro area would also act as a counterbalance to the French-German connection. I would like to think we would benefit from this," he added.
There was some comfort for Mr O'Connell in this regard when the British Prime Minister, Mr Tony Blair, dismissed speculation yesterday that his government was cooling towards the idea of the single currency and said he wanted to be in a position to put it to a referendum early in the next parliament.
Mr O'Connell said the benefits to Ireland of being part of the Euro should be exchange rate stability and low inflation. Despite this, inflation in the service sector - including transport, health and leisure - was running at 4 per cent, which was "too high".
According to Mr O'Connell this should put us on alert and the economy could not afford to be top of the Euro zone league table indefinitely.
The governor also issued the by now almost statutory warning that wages were rising too quickly or at an "uncomfortable rate".
And on top of this he pointed out that excessive house price rises were accumulating "social as well as economic" problems down the road.
But commenting on the weakness of the Euro over the past five months, Mr O'Connell insisted there should be "no undue concern". The simple reason for the weakness was that the American economy had been going through a period of success while much of the European economy had been struggling.
He stressed that talk of a strong Euro or a weak Euro was premature and the real test would be the extent to which the single currency challenged the dollar over time.
Meanwhile, Mr Jim Power, chief economist at Bank of Ireland, also warned yesterday that house prices as well as labour shortages were the two biggest threats to the economy in the future.
In the bank's May bulletin, he warned that housing was now approaching a crisis situation and prices were likely to rise by 20 per cent this year.
He added that unless more people, including foreigners, joined the labour force, wage pressures could be destabilising and bring the current boom to a premature halt.