When regulators launched macroprudential 2.0 a few weeks ago I wrote:
To understand what they’re about, we can turn to a similar historical period. In 2003 the RBA confronted a relatively weak economy following the dot-com bust but a runaway property bubble in Sydney.
To combat it, the then Macfarlane RBA set about popping the bubble without crashing the economy by launching a major jawboning assault on investors combined with a couple of short and sharp rate hikes. They succeeded in doing a lot more damage to sentiment than they did actual monetary tightening which helped mitigate the fallout.
