This type of forward guidance is sometimes termed “Delphic” 7, because, like the Oracle of Delphi, it basically consists of a forecast, in this case a forecast by the central bank of how the economy will likely evolve. But our forward guidance is also intended to clarify our reaction function. The reaction function maps the economic environment into our instrument space.
To put it simply, it relates what w e think will happen to what we will do if it happens.