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Work to end boom and bust through central banks, policymaker says

The Bank of England and other central banks should try to prevent future credit bubbles from developing, its deputy governor has suggested.Charles Bean suggested that a policy position of "leaning against the wind" as the economy booms could be justified, in order to prevent the worst effects of the bust to come.The inflation of the property bubble in the UK ended with the onset of the credit crunch, which has caused house prices to fall by 15 per cent over the past year according to mortgage lenders.Moreover, the UK itself seems likely to officially enter recession at the end of this year, as a direct result of the financial crisis.Speaking at a conference in Istanbul, Mr Bean said: "Given the potential costs of a bust, it would therefore appear to be wise to use monetary policy to try to prevent the build-up of the imbalances in the first place."[This position would] justify 'leaning against the wind' during the upswing phase of a credit/asset price boom in order to moderate the boom and thus also the prospective fallout from any subsequent bust."

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