Forward guidance
A central bank's conditional communication about its future policy approach.
Plain languagePractical exampleConnected reading
01
What is it?
A central bank's conditional communication about its future policy approach.
02
Why does it matter?
It can influence expected rates, bond yields, currencies and financial conditions before the next decision.
03
How should it be read?
Separate date-based promises from data-dependent conditions and compare wording with the prior decision.
04
Common mistake
Reading guidance as an irrevocable promise.
A simple example
A stance tied to the inflation outlook allows policy to change when the data change.