Put simply, this is what Prompt Corrective Action (or PCA) is intended to achieve – to intervene early and take corrective measures in a timely manner, so as to restore the financial health of banks that are at risk by limiting deterioration in their health and preserving their capital levels.
As such, communication about the possible trajectory of monetary policy tools (first, interest rates; later – also asset purchases) has become a distinct monetary policy tool unto itself. To grasp the significance of this operational shift, we can recall that communication has not always been an item on the central banks’ agenda.