william c dudley : opening remarks at the economic press briefing on the survey of consumer expectations opening remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the economic press briefing on the survey of consumer expectations, federal reserve bank of new york, new york city, 18 november 2016. * * * good morning, and welcome to the new york fed ’ s economic press briefing. i am pleased to have the opportunity to speak with you today about our survey of consumer expectations. this is an important source of information that we use in our analysis of current and future economic conditions to help inform our monetary policy decisions. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee or the federal reserve system. 1 in pursuing its monetary policy objectives, the federal reserve relies on a large number of data sources that provide information about recent developments and the current state of the economy. most of these data sources are backward looking. that is, they provide data about past decisions and outcomes. in contrast, we know relatively little about the forward - looking subjective expectations and intentions of economic agents, which are a key determinant of current and future outcomes. this information, though, is essential for formulating policy and evaluating its effectiveness. the macroeconomic outcomes we observe reflect preferences and constraints, as well as beliefs of individual consumers and firms. therefore, a fuller understanding of such outcomes requires reliable data on the beliefs and intentions held by economic agents and how they evolve over time. in particular, consumer expectations influence a variety of considerations, including spending and saving behavior, wage dynamics, job search, housing demand and the demand for credit. given their importance in determining u. s. economic activity, consumer expectations are of particular value in assessing the economic outlook and the related risks. over the last decade, we have devoted significant resources to improving the measurement of the economic expectations of households. this work culminated in the creation of the survey of consumer expectations, or sce, in 2013. the expectations data collected in our survey give us direct insight into households ’ decision - making and consumers ’ financial and economic outlooks. while we monitor expectations on a number of topics, of particular importance are households ’ medium - term inflation expectations. having reliable measures of inflation expectations is crucial to assess the effectiveness of monetary policy and central bank communications. such an assessment focuses on analyzing the extent to which longer - run inflation expectations remain well - anchored, and on

evolution of asset prices and the economy from 1970 to 2003 for three of these economies, the united states, the united kingdom, and japan. 9 for each country, the top panel of the figure shows the evolution of an aggregate inflation - adjusted index of asset prices - which consists of an average of stock prices and residential and commercial real estate prices. the shaded areas cover recession periods, as determined by the business cycle dating committee of the national bureau of economic research in the united states, and a comparable see, for example, lubos pastor and pietro veronesi ( 2004 ), “ was there a nasdaq bubble in the late 1990s? ” nber working paper series 10581 ( cambridge, mass. : national bureau of economic research, june ). they argue that the high level of uncertainty about the future growth rate of dividends of tech firms helps explain these firms ’ stock prices without resorting to a bubble. the difficulty of satisfactorily “ detecting ” bubbles is well known in the economics literature. for a recent survey see refet gurkaynak ( 2005 ), “ econometric tests of asset price bubbles : taking stock, ” finance and economics discussion series 2005 - 4 ( washington : board of governors of the federal reserve system, january ). for uniformity across countries, all data shown in this figure, and data discussed later on, including those for the united states, are drawn from international institutions. the asset - price data have been kindly provided by the bank for international settlements ( bis ). for detailed explanations of these data see c. e. v. borio, n. kennedy, and s. d. prowse ( 1994 ), “ exploring aggregate asset price fluctuations across countries : measurement, determinants, and monetary policy implications, ” bis economic papers 40 ( basel : bank for international settlements ). methodology for the other countries. 10 the bottom panels show the evolution of gross domestic product in these economies together with a historical estimate of the economy ’ s potential. 11 to be sure, business cycle chronologies may differ somewhat depending on the underlying methodology. the dates of peaks and troughs in economic activity for the analysis that follows are from the economic cycle research institute. for the united states, these match the dates determined by the national bureau of economic research ( nber ). for other nations, the institute ’ s methodology yields dates that are comparable to the nber dates for the united states, which facilitates comparisons across countries