##bated. home prices continue to fall, and there is no indication that the bottom has yet been reached. moreover, recently released information suggests that employment and production have weakened somewhat and that banks are tightening lending standards not only for housing loans but also for commercial real estate loans, as well as loans to both businesses and consumers. a slowing of the pace of increase in private consumption is becoming somewhat more evident, but the trend remains moderately upward. business fixed investment, meanwhile, is also continuing its moderate upward trend. in terms of macroeconomic measures to address the situation, the federal reserve has been aggressively lowering its policy interest rate, and the u. s. government has decided on a fiscal package to stimulate the economy, including a tax reduction. although lower growth in the u. s. economy may be unavoidable for the time being, it is likely to return to a path of growth close to potential, as the housing market correction draws to an end, the tightness in financial conditions eases, and the effects of policy measures make themselves felt. the risk should, however, be borne in mind that, if the negative effects from the housing market correction or financial market developments are greater than expected, the u. s. economy may slow further through negative wealth effects, credit tightening, and deterioration in business and consumer sentiment. the euro area economy continues to expand, though the pace of increase is moderating. although export growth has recently decelerated and there are causes for concern, such as weakness in indicators of private consumption and volatility in financial markets, activity in the corporate sector, particularly business fixed investment, remains strong and it is likely that economic growth will continue. as for other regions, growth continues to be robust, especially in china, india, and russia, while the nies and asean economies are also maintaining a moderate pace of expansion overall. thus, the world economy taken as a whole is continuing to expand. however, we need to bear in mind the possibility that, depending on their extent, future disruptions in global financial markets or a slowdown in the u. s. economy may have adverse implications not only for major economies but also for emerging economies. at the same time, attention should also be paid to the risk of inflation. in the united states and europe, consumer prices are continuing to rise due to increased energy and food prices. in china, there are signs of overheating, visible especially in fixed investment, and inflation is rising, with food

market conditions overseas. at the same time, it has also become apparent that, since monetary policy takes effect via its influence on financial markets and the behavior of financial institutions, the globalization of financial markets means that policy actions by individual central banks are mutually influential. it is for this reason that central banks have frequent and detailed exchanges of views about each other's economic and financial situations as well as their respective thinking concerning monetary policy. the basic task of central banks, however, remains unchanged. each central bank, having a good understanding of conditions overseas, should assess its own economic and price situation in a forward - looking manner and carry out appropriate policies to ensure that economic growth and prices remain stable. central bankers universally agree that the stability of the world economy is achieved by economic and price stability in each country supported by appropriate monetary policy. although the ultimate goal of monetary policy remains economic and price stability, i must add that to achieve this it is not enough to look only at price indices and growth rates. we must be attentive to factors likely to affect the economy and prices in the long run, such as developments in asset prices as well as the financial market situation and state of the financial system. episodes such as the recent subprime mortgage problems or the bursting of the economic bubble in japan indicate that changes in asset prices may on occasion result in considerable fluctuations in the economy and prices over the medium to long run. to achieve long - run economic and price stability, therefore, we need to be constantly vigilant concerning risk factors such as bubbles or financial system disruptions that cause large losses when they materialize, even though the probability of such materialization may be low. in this regard, information such as developments in asset prices as well as changes in market conditions and the state of financial system stability should be carefully analyzed. these points of concern are incorporated within each central bank's framework for conducting monetary policy. in the case of the bank of japan, we examine such long - run risk factors under the " second perspective " specified in the framework for the conduct of monetary policy introduced in march 2006. the european central bank ( ecb ) crosschecks information obtained through its assessment of the economy and prices against that obtained from its monetary analysis. the federal reserve, with its introduction last november of measures to enhance transparency, started to make public federal open market committee ( fomc ) participants'views about the level of uncertainty and risk factors affecting its medium - term outlook. even countries that practice