In recent years, central banks have used various tools to ease monetary conditions and stimulate demand when their policy rate was at the effective lower bound. 20 For example, in 2009 we issued a conditional commitment to keep the key policy rate unchanged for a year, as long as the outlook for inflation didn’t change.
Other central banks also used such explicit forward guidance as well as large-scale asset purchases, typically of government securities, for this purpose. Further research is needed to examine the effectiveness of these tools and how best to use them. Finally, the experience during the crisis, when both aggressive monetary and fiscal stimulus were used, highlighted the benefits of simultaneous policy action.