Tumpel-Gurgerell: Central banks need to be pricks…

…of asset bubbles. Asset bubbles and financial sector imbalances should be dealt with preemptively, she says.

The financial crisis represents the greatest ever challenge for the euro, she says. 2009 will be very difficult.

Deflating asset bubbles is likely to be the consensus change in the world of central banking in the wake of the recent crisis: no longer will central banks have a hands-off policy on asset prices. Having seen ruinous stocks and real-estate collapses in the last decade, they will do their best to keep markets from getting too frothy and will probably over-react, at least at first.

EUR/USD trades at 1.3775.