But we still face the challenge of distinguishing the quantitative role of, say, time-varying term and risk premiums on the one hand from that of expectations (including any speculative component) regarding underlying fundamentals on the other. As an example, consider house prices.
While the probability of this scenario was still not that high, it seemed to be increasing, to the point where it caused us some discomfort. Readers of the Governor’s 6 June remarks to the House Economics Committee could see quite clearly the degree of concern at that time. We can all feel some genuine relief that things have looked better since.