RBA’s Bullock says central banks are ready to ‘take action’

Central banks are more likely to take action if risks appear to be building than they were before the global financial crisis, an assistant governor at the Reserve Bank of Australia has said.

Speaking on March 14, Michele Bullock discussed whether policymakers look at financial stability differently following the global financial crisis.

Bullock said that prior to the financial crisis there was a “school of thought” which maintained that since asset bubbles could not be detected in advance, it was better to “clean up after any bust”.

Now, she believes policymakers are more likely to be proactive in their approach to maintaining stability. “There is now more acceptance of the need to take action when system-wide risks are rising,” she said.

The RBA assistant governor noted the increasing use of macro-prudential tools was testament to this fact.