As I alluded to in my introduction, monetary policy does not just affect the economy through the current setting of the interest rate, but also through the expected path that the policy rate will take over time. Providing information about how that path is likely to evolve forces policymakers to think more deeply and systematically about policy.
If this level of trust is broken, as was the case during the 2008–09 financial crisis, it can ultimately paralyze the activities of the financial intermediaries and the markets, generate uncertainty, and eventually cause panic, producing a run on the banks and paralyzing markets, leading to serious negative consequences for the overall economy.