However, a welfare comparison between the impact of an extended interest rate rule – including financial variables – and counter-cyclical loan-to-value ratios leads to ambiguous results, as lenders and borrowers are affected in opposite ways. This suggests a strong need for cooperation between monetary and macro-prudential authorities to avoid conflicting policies.
There is a possibility that the U.S. economic recovery pace will be slower than projected as a result of sluggish performance in the housing sector and relatively slow recovery in the employment conditions for long-term unemployed workers and involuntary part-time workers. Tepid performance in emerging economies, disinflation in the euro area, and geopolitical problems should also be monitored closely.