Too often, academics and market participants have interpreted forward guidance as Odyssean, while for policymakers it can only be Delphic. The case for the ECB’s enhanced forward guidance Why then didn’t the Governing Council decide, in June 2018, to simply return to the well-tested pre-crisis framework of managing expectations when there was no longer a need to provide additional policy accommodation?
Here it is useful to first consider the market environment we were facing during the first half of this year and up until the 13 June Governing Council meeting. You can see this on my second slide.