Given  4  BIS Review 96/2006  the analysis and forecasting tools we use today, it is difficult to say whether a sudden correction in house prices will occur, or whether we can count on a calmer and more prolonged adjustment. At the same time, the Riksbank must take into account the risks when conducting its monetary policy. If house prices and household indebtedness increase rapidly over a long period of time, there is a risk of imbalances building up. These imbalances may force an adjustment further ahead and in the worst case may have severe consequences for the real economy and inflation. If house prices rebound, this could lead to subdued demand further ahead through both a decline in household consumption and reduced investment in construction. This type of development could in the longer term lead to both inflation being below target and to weaker growth in the economy. It is difficult to manage this type of risk. One possibility is to make changes in the interest rate slightly sooner or later than would otherwise be justified on the sole basis of the forecasts for inflation and the real economy. It is hoped that such a policy will contribute to a smoother adjustment process and help to avoid a more abrupt correction. A two-year horizon is a good decision rule, but it cannot always work in all situations. There are now signs of some slowdown in the housing market.
The Euro-Summit on 15th December 2017 resulted in a renewed political commitment to foster further progress on EMU´s architecture during the first semester of the present year. The aim was to trigger the necessary discussions and achieve material progress in the 3/5  months preceding the closure, in spring 2019, of the current legislature of the European Parliament. Our political leaders assigned priority to the completion of the Banking Union, with the establishment of a common fiscal backstop for the Single Resolution Fund, and the introduction of a common European Deposit Insurance Scheme (EDIS) with eventual full risk mutualisation. Both are essential elements to severe the links between banks and sovereigns and to bolster the ability of the area to deal with large macroeconomic shocks. The development of the Capital Markets Union is surely another key project that deserves to be mentioned at the top of the political agenda. Leaders also agree on the need to reduce risks in banks’ balance sheets, including –but not only- the stock of non-performing loans, which is still too large in some jurisdictions. Current proposals to create Sovereign Bond-Backed Securities (SBBS) could contribute to reduce current home-bias in bank´s sovereign holdings if accompanied by regulatory reforms that ensure acceptance by investors. But these reforms should be carefully calibrated to avoid hindering liquidity and price formation in sovereign bond markets. But there are other issues that will require more time to agree and to put in motion.