William Dudley, the president of the New York Federal Reserve, has acknowledged that central banks must look at ways to burst asset-price and credit bubbles, challenging a tenet of the Greenspan-era Fed.

In remarks published on Friday, Dudley said: "The crisis has demonstrated that the cost of waiting to clean up asset bubbles after they burst can be very high. That suggests we should explore how to respond earlier."

Dudley dismissed the argument that policy should not react because asset