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.

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.

Domestic inflation reflects domestic monetary policy.

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.

I will be the first to say that it is always difficult to get monetary policy just right. But the Fed's analytical prowess is top-notch, and our forecasting record is second to none.

Monetary policy is not a panacea.