Global policymakers have no desire to damp asset prices, but a strong recovery in credit and/or financial leverage would pose a more serious policy dilemma. Only the Bank of England has macroprudential tools and these are untested. No central bank seems willing to use interest rates to fight financial-sector risks.
Rapid asset-price growth has prompted fears of ‘bubbles’ in financial markets. Global stock markets have reached new highs and house prices are recovering quickly in the US and UK. Some economists are demanding an immediate policy intervention, either through higher interest rates or new macro-prudential tools.