A slowdown in the United States' housing market may have knocked as much as one percentage point off annual growth, but does not seem to have affected consumer demand much, a top Federal Reserve offical said on Monday.

Cleveland Federal Reserve President Sandra Pianalto, who votes on U.S. rates, said the fundamentals of the U.S. economy were strong and the biggest risk was inflation.

"The predominant risk we face is that inflation does not moderate as we expect it to do. And we are keeping our eye on that issue. That's our objective and that's the issue that we have to stay focused on," she told a conference in Dublin.

Since 2005, U.S. inflation had been averaging around 3 percent on a medium-term basis, which was too high, Pianalto said. By contrast she did not believe the slowest U.S. house price growth for 14 years posed a big problem yet.

"Clearly the adjustment in the housing markets that we've had in the United States has slowed our economic growth. According to some measures it has taken off a full percentage point of GDP. But the fundamentals of our economy continue to be solid," she said

"The aspect of housing markets we are still looking at is whether there is any spillover into the consumer sector, and as of yet we have not seen substantial spillover into the consumer sector. We are watching that carefully," she continued. Many in financial markets expect that the Fed will have to lower U.S. borrowing costs from 5.25 percent because of the housing market slowdown, though as of a June 6 Reuters poll, most did not see a rate cut this year.

Irish central bank governor and ECB Governing Council member John Hurley, speaking at the same event, forecast a soft landing for Ireland's previously bubbly housing market with percentage price growth slowing to the low single digits this year.

For much of her speech, Pianalto stuck to the theme she had discussed last week at the Bundesbank in Frankfurt, namely the importance of keeping down public inflation expectations.

"Expectations can become unglued under some circumstances, even if the current inflation measures appear contained."

Rising oil and commodity prices in particular brought a risk of eroding the public's trust and that inflation expectations would move higher, she said, although the Fed thought energy price impacts would dissipate over time.

"Since 2005, the three- to five-year moving average of U.S. inflation has hovered around 3 percent. This is above where I would like to see the trend settle in the longer run," she said.