At the federal level, the fiscal stimulus of 2008 and 2009 supported economic output, but the effects of that stimulus faded; by 2011, federal fiscal policy actions became a drag on output growth when the recovery was still weak.

As always, it would be important to ensure that any fiscal policy changes did not compromise long-run fiscal sustainability.

Monetary policy will, as always, respond to the economy's twists and turns so as to promote, as best as we can in an uncertain economic environment, the employment and inflation goals.

My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.

During the 1970s, inflation expectations rose markedly because the Federal Reserve allowed actual inflation to ratchet up persistently in response to economic disruptions - a development that made it more difficult to stabilize both inflation and employment.

Our ability to predict how the federal funds rate will evolve over time is quite limited because monetary policy will need to respond to whatever disturbances may buffet the economy.