The Bank of England may find monetary policy such as raising interest rates "the only game in town" to combat financial stability risks such as the housing market, the deputy governor has warned.
Outgoing Monetary Policy Committee member Charlie Bean acknowledged the central bank has created prudential tools to curb risk, such as the Financial Prudential Committee. But he said monetary policy can still play a role in controlling "irrational exuberance" in mortgage lending. In a speech at the London School of Economics, he said: "Compared to the impact of changes in interest rates, we have relatively little experience of deploying macroprudential instruments. And there will often be scope for those affected to work out ways to circumvent them, including by moving activities outsid...
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