BACK in the middle of the fast housing boom in 1990, the Central Bank called in all the big banks and building societies and, so the story goes, twisted their arms to try and stop an inflationary bubble developing in the market.

It was hardly surprising, therefore, that news early yesterday of a round of meetings between the Central Bank and the main lenders was met with less than wholehearted enthusiasm in the Dublin markets.

Nervous investors, mindful that the monthly credit figures were due late yesterday, put two and two together and thought it added up to another arm twisting episode from the monetary authorities.

Later, a statement from the Central Bank that it was merely engaged in an information gathering exercise calmed nerves. Meanwhile, the monthly credit figures for March showed that the rate of growth in borrowing from banks and building societies was just a little higher than previous months. Talk of an imminent interest rate rise suddenly receded.

Interpreting what the Central Bank is up to is never easy. They wouldn't have it any other way in Dame Street. However, it does seem that, for the moment, it is just collecting information from all the banks and building societies. It has not tried to engage in what the economic textbooks quaintly call "moral suasion", otherwise known as twisting the arms of the financial institutions to try to get them to do its bidding.

However, its decision to meet all the financial institutions, rather than just take informal soundings from a couple of the big ones, is interesting. A few years back, the Central Bank could talk to a couple of lenders and get a good feel for the market and particularly for demand for house loans. Now the market is so competitive that a view from all the institutions is required.

The Bank may not be concerned enough yet to try to stem the tide of competition offering lower interest rates and better and better deals for new borrowers. However, it is keeping a close eye on developments.

Recent figures from the Department of the Environment showed an average rise in new house prices of 7.4 per cent last year and a 6.2 per cent increase in second hand house prices. The Bank will be watching with some concern reports of record prices at the top of the market.

The latest figures show a 14 per cent annual rise in mortgage lending in March, and house prices continue to storm ahead. The market may soon calm for summer but, if borrowing and house prices pick up again in the autumn, the Central Bank will be concerned about the implications for prices moving into 1997, which is the year inflation performance will count towards qualification for the single currency.

The dilemma for the Bank is that its hands are tied. On one side, it is trying to align Irish interest rates with German rates, and the latter are set to remain low because of the weakness of the German "economy. Because the Bundesbank reduced rates last month, it felt obliged to follow. A decision to head in a direction opposite to that in Frankfurt would not be taken lightly. For one thing, a unilateral move to higher interest rates would lead to, an unwelcome rise in the pound against sterling.

On the other side, the Bank faces a highly competitive mortgage market where, it would be very difficult to get the banks and building societies to rein in the amount they are lending. In the old days, the Bank might have threatened to slap on credit controls limiting the amount that the banks and building societies could lend. In today's market, such controls would be most unpopular and difficult to implement.

For the moment the Central Bank is likely to sit tight. Apart from some areas of the housing market, there are few enough signs of serious inflationary pressures. But if the pace of mortgage lending accelerates again in the second half of the year, the Bank may become worried.

With qualification for the single currency in prospect in 1997, the Bank will not want to be blamed for failing to keep inflation in check.