Interest rates are set to rise higher than forecast and may reach 4 per cent by June, according to the Bank of Ireland (B of I) chief economist Dan McLaughlin.
Dr McLaughlin, said that the bank would change its interest rate forecasts on the back of the global boom.
Dr McLaughlin said: "The last few weeks have seen surprising fourth quarter growth figures from a range of economies.
"Growth in the euro zone was also more buoyant than generally forecast, at 2.7 per cent for 2006 as a whole, again the fastest pace since 2000.
"Consequently, B of I believes that the ECB will not be content to just move rates up one more time, to 3.75 per cent in March, and now forecasts an additional quarter point more, to 4 per cent, most likely in June."
Dr McLaughlin also said that the bank was revising its UK forecast to 5.5 per cent rates over the next few months.