2013 Reports

Forward Guidance by Inflation-Targeting Central Banks

Woodford, Michael

One of the notable features of inflation targeting as an approach to the conduct of monetary policy has been the increased degree of transparency on the part of inflation targeting central banks, not only as to their decisions but also with regard to the goals that policy seeks to achieve and the reasoning behind individual decisions. The degree to which this makes it appropriate, or even necessary, for inflation-targeting central banks to speak in advance about future policy decisions has been a topic of debate, but over time, inflation-targeting central banks such as the Reserve Bank of New Zealand, the Norges Bank, and Sveriges Riksbank have also led the way in increasing the degree of explicit communication about the likely forward path of short-term interest rates on a regular basis.