Chart 12: Real effective exchange rates(a)  United Kingdom Japan  Indices: January 2007 = 100 140 Euro area 130  United States China  120 110 100 90 80 70 60 2007  2008  2009  2010  2011  2012  2013  Source: Bank for International Settlements. (a) Deflated using consumer price indices. 12  BIS central bankers’ speeches
This will offset the impetus to consumption and investment provided by the near-zero interest rates. 7. Some academics believe that the effectiveness of the quantitative easing policy in the US is also undermined by the fact that the US property market has not yet bottomed out and US households need to continue to de-leverage. Many policy measures introduced in the US recently aim to reduce the pain of households in a falling property market and slow down the process of foreclosures. Even though property prices have already fallen significantly, more than 50% in some places according to anecdotal reports, potential buyers still prefer to wait as they fear that prices may fall further once the huge stock of foreclosed properties are put back to the market or when interest rates return to more normal levels. In other words, while measures to slow the downward adjustment of the property market are well-intentioned and have their political merits, they could prolong the time needed for the market to reach a new equilibrium or find the so-called clearing price. In my view, this may delay a true recovery of the property market and create a negative drag on the repair of US  2  BIS central bankers’ speeches  households’ balance sheets, making the recovery of consumer confidence farther and farther away. 8. Finally I would like to share with you a few policy lessons learnt from the latest crisis:  (a)  Households, companies and governments alike must avoid excessive leverage or borrowing.