Calendar-based guidance uses specific date expressions for monetary easing, such as “over the next six months.” Some people consider that calendar-based forward guidance is superior to open-ended forward guidance from a transparency and effectiveness perspective. State-contingent guidance provides a clear description of the economic conditions under which the accommodative policy will be maintained by using, for example, a threshold on the inflation outlook.
When comparing calendar-based and state-contingent forward guidance, the state-contingent approach is regarded as being superior for two reasons. First, it provides assurance of a central bank’s intention to maintain its accommodative monetary policy even after economic recovery strengthens by introducing such specific expressions in the guidance.