e to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. Th

On May 19, 2006 Ben Bernanke, Chairman of the Federal Reserve System, has touched on the housing situation in the United States in his Report on Monetary Policy. In essence, the forecast of Prof. Bernanke is that there is not going to be the dreaded bubble burst predicted by so many ‘bubbleologists’ out there (who have been predicting Apocalypse Now consistently since early 2002), but that real estate appreciation is poised to slow down considerably from recent years. The second point made by the Chairman is that the slow down in real property appreciation comes as a respite for the whole economy, as the surge in housing prices has been one of the major inflationary forces in recent times.

According to the Chairman, the U.S. economy will continue to perform well for the remainder of 2006 and in 2007. To be sure, higher energy prices will probably put some restraint on economic activity for a while longer. But so long as cost of energy increases slowly, as it is suggested by futures prices, this restraint should diminish as 2006 progresses. In addition, economic activity has continued to receive some impetus from post-hurricane recovery efforts, and the reopening of facilities shut down by the hurricanes is already being reflected in the rebound in industrial production. Federal assistance will continue to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. The

predicting Apocalypse Now consistently since early 2002), but that real estate appreciation is poised to slow down considerably from recent years. The second point made by the Chairman is that the slow down in real property appreciation comes as a respite for the whole economy, as the surge in housing prices has been one of the major inflationary forces in recent times.

According to the Chairman, the U.S. economy will continue to perform well for the remainder of 2006 and in 2007. To be sure, higher energy prices will probably put some restraint on economic activity for a while longer. But so long as cost of energy increases slowly, as it is suggested by futures prices, this restraint should diminish as 2006 progresses. In addition, economic activity has continued to receive some impetus from post-hurricane recovery efforts, and the reopening of facilities shut down by the hurricanes is already being reflected in the rebound in industrial production. Federal assistance will continue to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. Th

r inflationary forces in recent times.

According to the Chairman, the U.S. economy will continue to perform well for the remainder of 2006 and in 2007. To be sure, higher energy prices will probably put some restraint on economic activity for a while longer. But so long as cost of energy increases slowly, as it is suggested by futures prices, this restraint should diminish as 2006 progresses. In addition, economic activity has continued to receive some impetus from post-hurricane recovery efforts, and the reopening of facilities shut down by the hurricanes is already being reflected in the rebound in industrial production. Federal assistance will continue to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. Th

futures prices, this restraint should diminish as 2006 progresses. In addition, economic activity has continued to receive some impetus from post-hurricane recovery efforts, and the reopening of facilities shut down by the hurricanes is already being reflected in the rebound in industrial production. Federal assistance will continue to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. Th

e to buttress rebuilding activity in coming quarters.

More broadly, the major factors that contributed to the favorable performance of the U.S. economy in 2005 will remain in place. Long-term interest rates are expected to remain at acceptable (low) levels, and conditions in corporate credit markets are generally positive. The household sector is also in good financial shape overall and should stay so even if - as expected - housing markets cool down. In addition, the improved outlook for economic growth abroad bodes well for U.S. exports. However, the effects of the cumulative tightening in monetary policy should keep the growth in aggregate output close to that of its longer-run potential.

Core inflation is likely to remain under some upward pressure in the near term from rising costs, as the pass-through of higher energy prices runs its course. But those cost pressures should wane as the year progresses, offset by the slow-down presently occurring in real estate. Moreover, strength in labor productivity should continue to dampen business costs more generally. With little evidence to date that resource utilization has put appreciable upward pressure on prices, and with longer-run inflation expectations continuing to be well anchored, core inflation will remain contained in 2006 and should stay the same in 2007.

Prof. Bernanke, furthermore, commented that nonetheless, some risks attend his economic outlook, with some of the uncertainty centered on the prospects for the housing sector. He cited some observers who believe that home values have moved above levels that can be supported by fundamentals, and that some realignmen