Do central bankers have any bite?

Analysis: One scene in Quentin Tarantino's Reservoir Dogs features the heavily-armed Harvey Keitel and Michael Madsen engaged in a vicious argument. Keitel's diatribe comes to a halt when Madsen retorts with the taunt: "Are you gonna bark all day, little doggie, or are you gonna bite?"

Yesterday, the Central Bank issued its latest warning about the property market. We've heard it all before. The real question is what will it - what can it - actually do? Is there any bite?

The bounce back in the market is not what the bank expected. Its Financial Stability Report, published last year, was based on evidence on the economy available up to the end of September last.

At that time the housing market appeared to be slowing down and the Central Bank eased the tone of its previous warnings and welcomed the prospect of a soft landing.

As if to spite it, house price growth re-accelerated to reach 8 per cent by end-year, while private sector lending is running at around 25 per cent. Two responses have come to the Central Bank's warnings. "So what?" is the first and "So what, are you going to do about it?" is the second.

In relation to the first, the start of the week saw Irish Intercontinental Bank (IIB) and Bank of Ireland assert that our stock of debt is unremarkable and anyway backed by a large stock of deposits and rising real incomes.

The Central Bank could better illustrate its case by analysing the quality of those deposits (are they well diversified or based on the shaky foundations of equity withdrawals?) and on the stability of rising incomes.

In relation to the second response, financial markets are predicting that the ECB is going to start biting pretty soon, for reasons other than the state of our property market. The hawks on the ECB's governing council have been pushing for rate hikes for some time now. With euro-zone growth gathering pace, dovish concerns that rate hikes will kill Europe's recovery have been diminishing. The only nagging doubt - the state of Germany's economy - is now disappearing as the latest Ifo index significantly improved this week.

Trading on euribor interest rate futures contracts implies that three quarter point rate hikes will occur this year, most likely in March, June and September. If that doesn't silence our property market's bark, nothing will.