All the non-standard measures adopted in response to the financial strains are, by their nature, temporary. It remains essential to ensure price stability, anchoring inflation expectations in the euro area in line with the objective keeping inflation below, but close to, 2 per cent over the medium term. The interventions prevent the imbalances from worsening; on their own they cannot overcome the underlying causes.
To alleviate foreclosures, the FHA could be encouraged to collaborate with the private sector to expedite the refinancing of creditworthy subprime borrowers facing large resets. Other changes could allow the agency more flexibility to design new products that improve affordability through features such as variable maturities or shared appreciation.