In addition to quantitative easing, the concept of forward guidance, whilst not completely new, gained increasing traction albeit in different forms. Across the developed world, forward guidance was used by policymakers to inject additional stimulus as interest rates reached the lower bound. Such actions signalled a change in the reaction function of central banks – that is, to keep rates low for longer.
While monetary policy can make an important contribution to economic welfare by maintaining price stability, and thereby eliminating distortions arising from high and volatile inflation, the development of growth and employment are ultimately determined by the structural features of an economy.