Before this crisis, there was a strong preference, globally, for forward guidance, but recent events are really testing central bank communication. We’ve all been reminded that forecasts are flawed and that circumstances change fast. Plans that looked measured and reasonable at one point can look wholly inappropriate at another. As the MPC, we’ve not made any promises about future policy rates.
In the context of the enormous stress in many markets that characterized the financial crisis, the Federal Reserve also established new lending facilities and expanded existing facilities to respond to the unusual absence of liquidity in important markets and thereby enhanced the flow of credit to businesses and households.