The ECB’s current forward guidance on interest rates states that they will remain at their current level until three state-contingent criteria are met, but with one calendar element due to sequencing. I will come back to them in my second part. For comparison, in the United States, the Fed has currently two calendar-based forms of guidance: it will “soon be appropriate to raise the target range” for the federal funds rate and “bringing them to an end in early March” for net asset purchases. 3. Degree of commitment However, no central bank can define in advance all the states under which policy rates will remain fixed. In this sense, we cannot totally bind our hands with rules, and should keep some element of discretion facing unexpected data or events. Forward guidance is never setting policy on auto-pilot. There will always be an element of judgement, including about the distribution of risks around the staff projections. Central banks should be predictable, but not precommitted. Forward guidance in uncertain times Let me fine tune this general discussion in uncertain times, because we are certainly living through such an unexpected period: the unprecedented “covid economy”, geo-political tensions including Ukraine, the energy crisis, and the two great transformations ahead – digital and ecological. Forward guidance is a trade-off between the benefits of signalling intentions in advance and the constraints this places on future actions. In periods of high uncertainty, these effects accrue to both sides. On the one hand, indicative policy paths can help reduce unnecessary volatility and clarify ambiguity.
More generally, maintaining our high stock of assets until the third step of our sequence gives us through our reinvestments more leeway on the markets. Conclusion As of 2006, Olivier Blanchard said : “Monetary policy can pretend to be close to science if it can be conducted using simple and robust rules […] Monetary policy must be closer to art if it is frequently confronted to new, poorly anticipated and poorly understood, contingencies.” This mix of science and art is something I like in monetary policy. Therefore, I have cherished our discussions in the Governing Council, for my past seven years as Governor: if it wasn’t for discussion, why should we have meetings? But as I suggested in my remarks today, you can trust us around President Christine Lagarde to make pragmatically the right decisions in the right order and timing, in order to reach our course: bringing inflation back firmly and durably to around our 2% target. I thank you for your attention. 5/5  BIS central bankers' speeches