is starts to emerge, without having the illusion that monetary policy could provide the whole solution. the problem will have to be addressed by other instruments, like regulation and supervision. in what concerns monetary policy, the fullinformation approach that i described as one of the five main principles in the conduct of monetary policy may be particularly useful here. in particular, looking to developments in credit aggregates may be informative, namely because, as suggested by research done in the bis, buoyant credit expansion is normally – albeit not always 25 – associated with asset prices booms. claudio borio and philip lowe ( 2002 ) “ asset prices, financial and monetary stability, exploring the nexus ” bis working paper no. 114. white, william ( 2006 ) “ is price stability enough? ” bis working paper no. 205. rajan, raghuram g. ( 2005 ) “ has financial development made the world riskier? ” nber working paper no. 11728, november 2005. constancio, vitor ( 2002 ) “ policies and institutions for global financial stability ” in 8th international financial and economic forum, vienna november 2002. for instance, in the case of portugal we had high credit growth in the second half of the 90 ’ s but there was no asset price bubbles either in the stock market or in housing. the existence of the sort of short - term trade - off that we are considering may create significant problems to the inflation targeting monetary policy regime. being by definition very much attached to targets and forecasts for inflation as an almost exclusive basis for decisions, that framework has difficulty in incorporating other considerations into the decision - making process without losing some credibility. the notion that this can be overcome by extending the horizon of the inflation forecast by a number of years does not look realistic and has not been attempted. it is however very interesting the addition made by the central bank of norway to the list of criteria to assess future interest rate policy that i mentioned earlier and refers to asset prices increases and aggregate credit growth. of course, this criterion, although subordinate, only adds to the difficult of the framework to fend off the accusation of having multiple objectives hidden behind a single denomination of « inflation targeting » without the transparency of disclosing the exact criteria that may justify a temporary deviation from the main target. a disclosure, let me add, that i would consider virtually impossible or unwise to do. an important argument that alan blinder uses to defend his view on asset price bubbles is that the

identify some common denominator, a set of general principles that seem to have universal acceptance. i group those under five headings : 1. first, the main goal of monetary policy has been more clearly defined as being price stability, meaning a low medium term objective for the inflation rate. other objectives may be added, explicitly or implicitly, with different or equal weights in the objective function, but there is now no ambiguity about the main goal of policy. 2. second, to form a view about the economic situation and the risks for inflation, a full information approach is adopted, analysing the complete set of information variables. as wim duisenberg ( 2000 ) 2 expressed it once : « monetary policy - making in the euro area has to reflect the complexities and uncertainties which surround the transmission mechanism of monetary policy … these uncertainties imply that no single approach is likely to be entirely reliable.... reliance on a single indicator or forecast, or a single model of the economy or view of the world, would, in these circumstances, be extremely unwise. the strategy needs to incorporate the full range of relevant indicators and assess them in the context of a variety of different models ». even if the assessment is organized around two types of analysis, as it is the case in the eurosystem, the aim is « the cross - checking of information in coming to its unified overall judgement on the risks to price stability » 3. this is the way the issue is blinder, alan s. ( 2004 ) “ the quiet revolution : central banking goes modern ”, yale university press. duisenberg, wim ( 2000 ) “ from the emi to the ecb ” speech delivered at the banque de france's bicentennial symposium, paris, 30 may 2000. “ the ecb's monetary policy strategy ” communique of 8 may 2003 expressed in our may 2003 communique that clarified our basic policy framework, which also added that « the monetary analysis mainly serves as a means of cross - checking, from a medium to long - term perspective, the short to medium - term indications coming from economic analysis ». it was also stated, « monetary analysis will take into account developments in a wide range of monetary indicators including m3, its components and counterparts, notably credit, and various measures of excess liquidity ». this reference to many aggregates, including credit, is important especially in view of the instability since 2003 of traditional money demand functions for