But this carries risks to central bank credibility if circumstances change and no longer warrant sticking to the commitment. 2  BIS central bankers’ speeches  On the other hand, if guidance is conditional, it will have less impact and introduce volatility as markets permanently reassess the economic situation and assess the probability that the central bank will change its policy. Second, if central banks opt for conditional forward guidance, should it be “time contingent” – with time or dates references for future actions – or “state contingent” – dependent on the situation of the economy? Time contingent forward guidance runs the risk of being undermined by changes in the economic situation. “State contingent” forward guidance may appear better. Experience shows, however, that it is also more complex to manage especially when choosing the “triggers” or “thresholds” attached to commitments for the future. Partly as a result of the crisis, major structural changes are taking place in most advanced economies. Overall, the relationship between major macroeconomic variables are becoming unstable which makes it difficult to calibrate monetary policy on a limited number of parameters, such as, for instance, the unemployment rate. Nowhere are these changes more profound than in the euro area, where structural change is taking place at an accelerated pace as a result of the crisis and adjustment policies undertaken in Member States. We have taken stock of all these experiences and lessons in devising our approach to forward guidance in the euro area.

The focus of this Symposium – on insights, inclusion and innovation – underpins this adaptability. Insights – identifying with microentreprenurs As effective policymakers and practitioners, we need to have deep insights of our clients on-theground: the microentrepreneurs. This obligation begins with the awareness that the needs, tradeoffs and circumstances of microentrepreneurs are unique. They face very different financial constraints and in turn, very different choice sets. Hence, effective microfinance design that appeals to microentrepreneurs’ needs will not only require a rooted understanding of whether they have been good paymasters, who their other financiers are and how they conduct business; 1/3  BIS central bankers' speeches  but also their specific background, problems and values. As we speak, predictive credit analytics are being developed using alternative data, such as psychometric assessments and other non-financial information. This may be particularly useful in the microsegment, where traditional data on creditworthiness are usually scarce. These insights can also be leveraged to design products that are tailored towards the distinct needs of microentrepreneurs. Improving user experience and confidence is equally important. Application procedures, user interfaces and operational processes should be simple and seamless. Most importantly, they should be appropriate to the circumstances of microborrowers for whom a loan may well be the first experience with a formal financial institution. How they perceive this experience can have longer term effects on the level of trust they place in financial institutions, and reinforce behaviours that will either encourage them to use financial services, or further distance them from the formal financial system.