European Central Bank (ECB) Governing Council member John Hurley has said he expects the Irish housing market to experience a soft landing next year and beyond.
Mr Hurley said decisions on ECB interest rates for next year would be driven by economic data, and pointed to signs that higher rates were starting to cool the property sector in Ireland.
"What we are beginning to see are tentative signs coming from housing indicators and anecdotal evidence of maybe a lagged effect of the increase in interest rates," Mr Hurley said.
Speaking to the Financial Times Deutschland he said Ireland was exhibiting strong economic fundamentals and that higher ECB rates should eventually temper Ireland 's rapid credit growth.
He was optimistic about the Irish economy overall, though, seeing growth above 5 per cent in 2006.
"Looking forward, we would see that reducing somewhat, but we still think that we can probably grow at about between 4 per cent and 5 per cent for a number of years," he said.
The ECB is not giving any guidance for 2007 interest rates yet, but markets have correctly understood its policy for the rest of 2006, Mr Hurley continued.
The ECB has raised interest rates five times since December last year, and financial markets expect a further rate rise to 3.5 percent from 3.25 percent at the central bank's December meeting this year.
His comments echo those of fellow Governing Council member Klaus Liebscher in today's Frankfurter Allgemeine Zeitung, and by ECB President Jean-Claude Trichet, who told the European Parliament last week that he did not wish to shift market rate expectations for the rest of 2006.
Mr Hurley said the recent fall in oil prices - which the ECB views as a prime inflation risk - was a welcome and significant development, though there was still great uncertainty about their future development.
Wages also appeared in check, despite the strong recovery in the euro zone. "We haven't really seen any spill-over as of yet into wages. Wages have been pretty well behaved."