Second, the post-crisis low interest rate environment laid the ground for central bank communication to play a key role, and also for it to become much more forward-looking. Economic agents act in a forward-looking way, but they must manage a vast amount of information surrounded by a lot of uncertainty. As such, it is important to guide them to formulate appropriate expectations.
Ultimately, a better understanding of policy makers’ actions enhances the transmission of central bank policies. Hence, we started to use forward guidance as a monetary policy tool in and of itself. And, as you can see from the survey results in the graph, many central bank governors and academics claim that central bank communication has been intensifying.