And when the pandemic hit us, the pace and volume of purchases picked up substantially. Of course, unconventional monetary policy instruments are not without risk. When central banks increase their footprint in financial markets, the allocation of resources in the economy will be distorted. And, by substantially lowering both short-term and longer-term interest rates, vulnerabilities in the financial sector and real economy will increase.
But it was only in 1994 that the Fed decided to make its interest rate decisions public in real time. Designed between 1994 and 1998, the European Central Bank (ECB) was born at the start of a new era for central banking. Two developments during this period raised the importance of communication.