Monetary policy and asset prices

How should asset prices affect monetary policy, and how do they? It is argu ed that asset prices should not be included in the measure of inflation tar geted by monetary policy, which should focus on the prices of goods and ser vices for current consumption. The information yielded directly by asset pr ices, e.g. about inflation expectations and interest rate expectations, is examined. Finally, the question of what asset prices add to other indicator s is considered, and it is concluded that asset prices matter for monetary policy because they help to inform judgements about inflation prospects.