Ambrose Evans-Pritchard reports the resounding success of Norway’s central bank in using macroprudential tools to take the steam out of a housing bubble:
if the Bank [BOE] wishes to contain credit, it should learn from Norway’s success. Instead of raising rates, it has used “macroprudential” tools. It cut the loan-to-value ceiling on mortgages from 90pc to 85pc. It forced the banks to raise to capital buffers further.
The Norges Bank has recommended a 1pc counter-cyclical buffer based on its view of what constitutes a safe level of credit growth.
Contrary to claims that these tools never work, they worked splendidly, as you can see from this chart today from HSBC’s David Bloom.
The RBNZ adopted similar measures and it is puzzling why the RBA, which faces an equal threat, is not doing the same.