Instead, central banks form their expectations for interest rates mostly based on macroeconomic and financial market outcomes, while households and businesses rely on current interest rates and communications from central banks. For example, if a central bank lowers interest rates during a recession, the private sector may assume that the central bank knows that the long-run real rate will fall. When the private sector lowers its expectations for long-run rates, output and inflation fall, causing the central bank to lower rates even further.