Here at Norges Bank, the application of this method is not new – the interest rate forecast has been published by the Bank since 2005. The aim is to influence interest rate expectations and thereby contribute to achieving the objectives of monetary policy. 1 The Federal Reserve has published board  1  See speech by Janet L. Yellen, 25 February 2011: “Unconventional Monetary Policy and Central Bank Communications”, http://www.federalreserve.gov/newsevents/speech/yellen20110225a.htm. BIS central bankers’ speeches  1  members’ expectations of when the first key rate increase will take place since January 2012. 2 The second method is known as quantitative easing, or balance sheet policy, and consists of measures to change the composition and size of central bank balance sheets. This use of the balance sheet differs from the usual monetary policy operations in that instruments other than the key rate are used to influence market rates and economic activity. Traditional monetary policy operates through the commercial banking system: it influences the economy because banks let their interest rate conditions in the central bank pass through to their customers. Moreover, liquidity management is used to keep short-term rates close to the key rate. In countries where the key rate is close to zero, this instrument has been exhausted. At the same time, the effect of the key rate may be weaker than normal as many banks are consolidating and are reluctant to engage in lending.

4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  To provide stimulus, central banks have taken policy rates to the effective lower bound and beyond by using forward guidance, new lending facilities and asset purchase programmes. In parallel, monetary policy communications have been transformed. Committee decisions are now explained more fully, in a more timely and targeted way. Given greater supply uncertainty, more details are provided about the assumptions underpinning forecasts. And in the face of large downside tail risks, more facets of the reaction function are being spelt out. While there have been many innovations, given the time available today, I will focus on two: communications including forward guidance; and central bank facilities. Communications including forward guidance For both the euro area and UK, the past decade has been marked by increased transparency and more focused communications. The ECB has followed each monetary policy decision with a statement and press conference at each meeting since its creation in 1999 and these were supplemented a year later with macroeconomic projections. In 2015, it dropped the frequency of meetings from twelve to eight to allow for a fuller passage of time between decisions, and supplemented the statement with a fuller account of its monetary policy deliberations, published four weeks after policy announcements. Twenty years ago, the Bank of England was publishing minutes of its monthly policy meetings and quarterly economic forecasts in its Inflation Reports. It didn’t however always issue statements following decisions. Following the Warsh Report in 2015, we overhauled our communications.