By collecting data on a broad range of expectations, it is possible to analyze how they interact with each other and jointly influence households’ decisions. We also study how expectations vary with demographics and other household characteristics. The broad scope of the SCE allows us to study many questions relevant to economic policy— such as understanding housing market decisions, disentangling credit demand from supply, analyzing job search behavior and measuring wage growth as people transition between jobs. In addition, the survey has been used to help answer other policy-relevant questions as they have come up in our discussions. Two examples are households’ spending response to the decrease in gas prices in early 2014, and households’ early experiences and perceptions of the Affordable Care Act following its enactment. Some of this analysis relies on the ability of our survey to shed light on whether consumers expect a specific change in economic conditions to be temporary or permanent. A second important feature of the survey is that—in addition to simple point forecasts—for some variables, such as inflation, we get respondents’ entire forecast distributions by asking them to assign probabilities to various ranges of future outcomes. These so-called density forecasts in turn allow us to measure households’ uncertainty about future events by looking at the spread in their subjective distributions. Density forecasts also allow us to monitor the perceived likelihood that respondents assign to specific events, such as deflation or a large increase in earnings. A third important characteristic of the SCE is that it is a rotating panel.

Troubled financial markets and dangerous economic circumstances required the implementation of exceptional measures. Even if these measures have a welcome impact in the short term, central banks must remain focused on their core mission, which is to ensure price stability. This is their long-run contribution to economic well-being. Monetary policy does not create wealth in and of itself. It is the innovative and entrepreneurial strengths of the private sector, not short-term monetary policy measures, that are the engines of real sustainable growth. Could the short-term liquidity-creating measures pose a risk for price stability? This risk is often alluded to, and central banks are acutely aware that any measures must be rigorously and repeatedly assessed to prevent any mid-term resurgence of inflation. In any case, there are well-identified means of quickly reversing the effects of an abundance of liquidity, though it is true that the timing of such “exit” measures is a matter of delicate monetary policy assessment. Today, however, abundant liquidity and extended periods of low interest rates are recognised as posing a risk to financial stability. One of the lessons of the recent crisis is that price stability is not sufficient for financial stability. Many central banks are therefore placing greater weight on financial stability concerns in their decision-making processes. To this end, several now envisage the use of specific new (“macroprudential”) instruments to directly address the risks to financial stability. It is also worth considering whether central banks’ recent activism could undermine their independence.