The conditionality of the ECB guidance is not linked to a numerical threshold for inflation, but more broadly to changes in the outlook for price stability. Both quantitative and qualitative guidance have their relative merits, and both face challenges. First, forward guidance must be clearly understood by the public to be effective.
To this end it must neither provide too much information, which may confuse market participants about the central bank’s policy intentions, nor provide too little information, which may increase the risk of misunderstandings. Finding the right balance is particularly difficult for policymakers at the center of the public debate, be it in the United States, in Europe, or elsewhere.