For instance, for a given individual, the perceived probability of making large purchases over the next 4 months (home appliances, electronics, furniture, home repairs, improvements or renovations, autos or other vehicles) is highly correlated with actual purchases of those items 4 months later. Household spending growth expectations (over the next 12 months) are also significantly associated with self-reported actual spending growth 12 months later. In the labor market realm, the perceived probability of finding a job over the next 3 months accurately predicts actual transitions from unemployment to employment, in those 3 months. And the expected arrival rate of job offers is predictive of actual job offers over a 4-month horizon. So the evidence suggests that the subjective expectations we measure are indeed informative of future events, with individuals more likely to experience an event typically reporting a higher expectation of the event occurring. 10  BIS central bankers’ speeches  possible changes in expectations coming from changes in sample composition. In particular, we looked at the group of respondents who completed the survey both in September 2015 and in January 2016, and compared their three-year-ahead inflation expectations as measured by the individual density means across the two surveys.37 As shown in Slide 9, we found that the entire distribution of medium-term inflation expectations shifted to the left, indicating a widespread decline in expectations. Median expected inflation among these repeat respondents declined by 53 basis points, compared to 39 basis points without controlling for the changing sample composition.

However, its effects can be mitigated by monetary, fiscal and financial policy actions. Although the negative scenarios dominate, it is possible that Eurozone policy makers succeed in building a set of measures and reforms that soon restore market confidence. In any case, in such a scenario, given the required fiscal adjustments, the developed economies would continue to lag for a long period and would hold on to their loose monetary policies for some time. This would intensify the dichotomy between growth in advanced and emerging countries. In this context, a resurgence of capital inflows to emerging economies is a possibility. Domestically, one risk that cannot be ruled out are stronger effects from the higher external uncertainty, hitting harder the local financial markets, confidence, and consumption and investment decisions. Notwithstanding the capacity of economic policies to mitigate the effects of a more adverse external environment, it is important for the private sector to properly administer financial risks. Worth noting are the favorable financial indicators of the corporate sector (figure 10). In addition, currency mismatches continue to be stable and bounded, despite the increasing role of external debt as a source of funding. Still, it must be pointed out that financial intermediaries would be wise to keep a watchful eye on credit risk, considering its negative effects on external demand implied in the risk scenarios. 4  BIS central bankers’ speeches  As for households, on average the financial situation has not deteriorated. The recent increase in private consumption has evolved hand in hand with labor income.