Even countries that practice inflation targeting do not automatically adjust policy rates to keep inflation within their predetermined range, but retain a degree of flexibility in meeting their targets.
In the current environment, more-rapid declines in house prices may have an adverse impact on the broader economy and, through their effects on the valuation of mortgage-related assets, on the stability of the  1  Based on servicer data from First American LoanPerformance. BIS Review 55/2008  1  financial system.