TY  - UNPD
A1  - Orphanides, Athanasios
T1  - The forward guidance trap
N2  - This paper examines the policy experience of the Fed, ECB and BOJ during and after the Covid-19 pandemic and draws lessons for monetary policy strategy and ist communication. All three central banks provided appropriate accommodation during the pandemic but two failed to unwind this accommodation in a timely manner. The Fed and ECB guided real interest rates to inappropriately negative levels as the economy recovered from the pandemic, fueling high inflation. The policy error can be traced to decisions regarding forward guidance on policy rates that delayed lift-off while the two central banks continued to expand their balance sheets. The Fed and the ECB fell into the forward guidance trap. This could have been avoided if policy were guided by a forward- looking rule that properly adjusted the nominal interest rate with the evolution of the inflation outlook.
T3  - Working paper series / Institute for Monetary and Financial Stability - 190 
KW  - Monetary policy strategy
KW  - forward guidance
KW  - policy rules
Y1  - 2023
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/71211
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-712112
UR  - https://www.imfs-frankfurt.de/forschung/imfs-working-papers/details.html?tx_mmpublications_publicationsdetail%5Bcontroller%5D=Publication&tx_mmpublications_publicationsdetail%5Bpublication%5D=451&cHash=504414c9cf31defcd73241a72ecb6d42
PB  - Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
CY  - Frankfurt am Main
ER  -