User:Henk van Tijen/Forward guidance

Forward Guidance
The Bank of England issued the term “forward guidance” on August 7, 2013 when it said 'it would consider raising its short-term interest rate when the unemployment rate fell to 7 percent or below'.

Forward guidance is a promise about future (monetary) policy actions. The central bank is saying: “If this happens, we will consider doing this.”

It’s designed to give households, businesses and investors a clearer view on when interest levels might go up and thus enables them to better plan investments.

The strategy is also used by Bank of Canada,, the U.S. Federal Reserve and European Central Bank.

Critsism
If forward guidance is too conditional, investors still have little certainty about developments in the interest rates.