fall, ” nber working paper series, no 16334. see benati l. ( 2009 ), “ long - run evidence on money growth and inflation ”, ecb working paper series, no 1027. to credit and leverage as critical parameters that a central bank should consult regularly to measure the pulse of the economy. 11 the ecb had consistently used these indicators even when they were derided as relics of a defunct monetary doctrine. they proved useful. they gave information about financing conditions and the financial structure, as well as about the condition and behaviour of banks, when these sources of information were critical to the assessment of the health of the transmission mechanism and, more broadly, the state of the business cycle. this dimension of monetary analysis has proven particularly valuable in shaping the ecb ’ s response to the financial crisis. there is indeed evidence in support of the fact that, without duly taking monetary analysis into account, inflation in the euro area would have been distinctly higher at times of financial exuberance and would have fallen deep into negative territory in the wake of the financial markets ’ collapse, starting in the autumn of 2008. the economy as a whole would have been more volatile. 12 and thirdly, with regard to the pre - crisis consensus on monetary policy not to act on asset price bubbles, the crisis has vividly demonstrated that bursting asset price bubbles can be extremely costly. the public policy response to the crisis has – even when being successful in attenuating the immediate impact of a financial crisis on the real economy – carried substantial fiscal costs and has led to significant output losses. to confine ourselves to “ expost ” policies is, therefore, not enough and calls for effective “ ex - ante ” policies. the main policy tools in this regard are, of course, appropriate regulatory and supervisory policies. before the crisis, these preventive tools were insufficient to deal with the build up of asset price imbalances in the pre - crisis period. lessons have been learned, and with the re - design of the supervisory architecture in many countries around the world, and the basel iii regulatory reforms, enhanced preventive tools are underway. but also from a monetary policy perspective, greater emphasis on “ ex - ante ” prevention is warranted. to the extent that financial imbalances are accompanied by excessive monetary and credit growth with possible implications for the medium term outlook on inflation, central banks do indeed have an obligation to take appropriate action. with respect to the ecb, our focus

was offset by lower debt servicing costs. access to credit was easy and the cost of credit was relatively low. by 2007, the spread on a 2 year fixed rate 90 % loan - to - value ( ltv ) mortgage product over risk - free rates was just 0. 4pp. and a large share of mortgage products advertised were available to relatively riskier borrowers, such as 90 % + ltv or to borrowers who had recently faced repayment difficulties. over this period, the market was very active, with mortgage approvals averaging over 100, 000 per month. in the financial crisis and ensuing recession, house prices dropped and the market effectively froze. transactions fell from their peak of 150, 000 in december 2006 to their trough of 52, 000 in january 2009. and house prices contracted by over 15 % in february 2009, from a peak growth rate of over 10 % in june 20073. the housing recovery, as with the uk economic recovery in general, was slow and painful. house prices, led as usual by london, did not begin to return to their pre - crisis peaks until the end of 2013. even after the recovery, however, house price growth did not recover to pre - financial crisis rates. from 2014 - 2019, average house price growth was 5 % and the house price to earnings ratio for the uk as a whole did not return to its pre - crisis peak until 2017, despite the slow growth in earnings in the uk recovery. in most areas outside london, the south and east, the ratio is still below its pre - crisis peak. activity over this period was subdued relative to the period before the financial crisis. mortgage approvals averaged 61, 000 per month. the period between home moves became longer ; in 1988, households moved every 10 years on average. 30 years later, in 2017, this extended to every 17 years. see rachel, l. and smith, t. ( 2015 ) " secular drivers of the global real interest rate " and box 6 ( " the equilibrium interest rate " ) in the august 2018 bank of england inflation report for further discussion of this. real house price growth peaked at over 20 % in 2002 to 2003, but prices were still growing at around 9 % in 2007 in real terms. real prices started to contract from 2008, with the largest annual fall being 18 % in early 2009. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice