‘Forward guidance’: new monetary policy instrument or esoteric fad?

Abstract

In August 2013, the Bank of England adopted a new monetary policy known as ‘forward guidance’. This paper sheds light on this landmark moment and this rather obscure policy instrument. The authors unpack the rationale of this policy, its implementation modality and provide international evidence on its impact. Important questions are then raised about whether this policy is needed in the UK, and about the downsides of this seemingly innocuous monetary experiment.

Keywords:

• Bank of England
• forward guidance
• monetary policy