The role of monetary policy I would like to conclude with a brief discussion of the role of monetary policy in the housing recovery. The fact that mortgage purchase originations have remained nearly flat at a time when interest rates have hit historic lows naturally raises the question of whether monetary policy is effective in stimulating the housing market and thereby the broader economy.
As I will explain next, I believe that the answer is yes. Monetary policy has clearly set the stage for a revival of the housing market. Record-low interest rates have sparked interest in homebuying. Monetary policy has contributed significantly to the recent improvement in the labor market and thereby begun to ease one of the main sources of weak housing demand.