In terms of execution, this new phase will consist of a meeting-by-meeting (MBM) approach to setting interest rates. At a basic level, the transition from rate forward guidance to the MBM approach is in line with our monetary policy strategy, which assessed that forward guidance was primarily an appropriate response to the lower bound constraint.
As policy rates move away from the lower bound, the inherent flexibility of the MBM approach is better suited to calibrating monetary policy in a highly uncertain environment. Since monetary policy works through its influence on the entire yield curve, it is important to appreciate that MBM monetary policy essentially has two elements.