As an illustration, Table 1 shows the dates and wordings of recent forward guidance announcements by three major central banks.4 The Fed has introduced threshold-based forward guidance about its interest rate policy in December 2012. Low-interest policies are announced to be in place until the unemployment rate falls below a numerical threshold level of 6.5%. Explicit conditionality is introduced by quantitative and qualitative criteria.
Specifically, it is stressed that interest rates could be increased once inflation is expected to be above 2.5% or inflation expectations no longer remain well anchored. In June 2013, the Fed also provided date-based guidance about the tapering of its asset purchase program, revealing its intention to cease new purchases of Treasury bonds and mortgage-backed securities by mid-2014.