What has been the response of monetary policy to an environment characterized by increased inflationary pressures and high levels of uncertainty? First of all, I wish to note that, as in the entire realm of economic policymaking, uncertainty is inherently embedded in the set of conditions under which monetary policy is conducted.
By the middle of 2006, monthly sales of new and existing homes were about 15 percent lower than a year earlier, and the previously rapid rate of house-price appreciation had slowed markedly. The fall in housing demand in turn prompted a sharp slowing in the pace of construction of new homes.