William Dudley, the president of the New York Federal Reserve, last week discussed the challenges that central bankers face in combating asset-price bubbles; offering insight on how to deal with potential asset bubbles forming in the future.

Recent experience has underscored that poorly regulated financial systems are prone to volatile asset price movements. Moreover, the cost of waiting to respond to an asset bubble until after it has burst can be very high.

Dudley argued that while asset