The forward guidance protects the short to medium-term segment of the yield curve from unnecessary volatility by eliminating residual uncertainty about the expected rate path over the forward guidance horizon. In addition, it helps to steer the long end of the yield curve by affecting the expectations component of longterm interest rates.
Renewed net asset purchases reinforce the downward pressure on long-term rates by reducing risk premia, and also complement the impact of forward guidance on the expected short-term rate path by signalling the Governing Council’s commitment to maintain a highly accommodative monetary policy stance for a prolonged period of time.