However, the moderate growth in the M3 monetary aggregate indicates that this situation has not changed since the last monetary policy assessment. Thus, the monetary analysis shows that we can continue pursuing our expansionary monetary policy for the time being, without incurring additional risks. Since the first quarter of 2003, the year-on-year growth rate for mortgage loans has exceeded 5%. Mortgage loans to households slowed slightly at the end of 2004, but since then their rate of growth has accelerated to a level higher than that recorded in recent years. Mortgage loans to companies, which had declined over the past five years, have also risen again since the beginning of the year. Prices continue to increase in the real estate market, a development to which, in our view, the low mortgage rates have contributed. Well aware that our monetary policy is still expansionary, we are keeping a close eye on developments in the real estate sector. In view of the above-mentioned developments, we have decided to leave the target range for the three-month Libor rate unchanged at 0.25-1.25%. What were the most important factors that led to this decision? There were three of them. First of all, we needed to downgrade our expectations with respect to the development of the economy. However, there are no signs of any cyclical downturn and the economy continues to recover, even if this recovery is somewhat delayed and muted. Second, the lacklustre economic activity is being accompanied by an improvement in the medium-term outlook for inflation.
Firstly, there are the roles relating to supervision of firms and markets where financial instability could arise. Secondly, there is the oversight of the financial system as a whole - the systemic issues which could impinge on society. And thirdly there is the fiscal underpinning which may exceptionally be required to restore confidence in the event of failure. The fiscal underpinning is a role for Ministries of Finance. The other roles can either be combined institutionally or separated. I am sure each model is represented here today. In the UK, HMT has responsibility for the fiscal underpinning, FSA for the supervision of firms and market regulation, and the Bank of England for the stability of the system as a whole. ii)  The “Must Dos” for the Bank of England  The roles as such are set out with slightly more precision in the MoU, and it is from there that we start on our quest to decide what initiatives we – the Bank of England – should undertake, and how far we go with each. The MoU highlights three “must dos” for the Bank. I expect that these are similar in many central banks. They really define our mandate. a)  Assessment of Threats to Financial Stability  Firstly we need to assess the threats to the financial system. We need to be in a position to inform ourselves and to advise HMT at all times on the implications for UK financial stability of developments in both the domestic and international market places.