Bank of England governor Carney has praised the range of tools he has been given to intervene in specific markets if he sees risks to financial stability and the wider economy.
Carney believes acting to stop a bubble growing will help keep the recovery on track, for instance by using tougher capital rules to slow bank lending to a specific sector.
But European Central Bank boss Draghi said the blunt tool of monetary policy should be used instead, as banks and other financiers may try to dodge the more tightly focused measures.
“A distinct advantage of monetary policy as compared with macro-prudential policies is its robustness to regulatory arbitrage and its ability to get in all the cracks,” Draghi told banks at a conference in Rome.
His words contrast with Carney’s speech on Monday.
“The Bank demonstrated this flexibility recently with a package of measures targeted at the housing market, and it has outlined a broad range of additional tools if further action were required,” Carney told a New York audience.