Over the past year, home sales and construction have slowed substantially and house prices have decelerated. Although a leveling-off of home sales in the second half of 2006 suggested some tentative stabilization of housing demand, sales have softened further this year, leading the number of unsold new homes in builders’ inventories to rise further relative to the pace of new home sales.
In short, monetary policy becomes more effective in impacting the real economy if other policies act in a supportive way; and if they do not, it has less impact and expansionary policy has to last longer to fulfill the mandate. So, “weak dominance” is essentially about whether policies complement or compensate for each other.