Because they cannot rule out the chance that some asset prices might correct more than anticipated, policymakers must consider how the economy might withstand such a correction.
Corrections in interest rates and asset values may have the most potential for disruption when they impair the financial health of borrowers and lenders and thereby cause them to pull back even further than might be warranted by the change in rates or prices. In that regard, we have some reason to be optimistic that the players are well positioned to absorb these adjustments.