Its promise not to follow that usual pattern of reaction will be painful to fulfil, when that time comes, because the central bank will have to watch inflation rising while remaining atypically passive.
But that promise has a value today, as it generates optimistic expectations, supports spending and thus facilitates the central bank’s job at present.3 The ECB’s forward guidance As I wrote at the start, the ECB Governing Council has recently provided forward guidance, and the Federal Reserve and other major central banks have done so before on various occasions.