To be clear, I think that in most cases, monetary policy should not respond to asset prices per se, but rather to changes in the outlook for inflation and aggregate demand resulting from asset price movements. This point of view implies that actions, such as attempting to "prick" an asset price bubble, should be avoided.
The Bank of Latvia has adopted the full set of indirect, market-based monetary policy instruments in use at the European Central Bank. Currently we are in the process of fine-tuning these instruments and increasing their efficiency. Capital movements Both current and capital account transactions have been fully liberalised from the first days of Latvian independence.