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. [ 6 ] in this context, i would like to distinguish two approaches to forward guidance : first, the central bank can clarify its reaction function if there is a misperception or uncertainty about it among the public due to imperfect information. and second, the central bank could communicate that it intends to deviate from previous behaviour in the future. however, just as in the case of any other policy tool, the public may face the problem of disentangling information regarding the central bank ’ s policy from information on the state of the economy. in times of considerable uncertainty, observers could – falsely – interpret an unexpected expansionary policy move as a signal that the central bank deems aggregate demand to be weaker than they had anticipated. by dampening inflation expectations, the surprise could have an unintended adverse effect on the economy temporarily. [ 7 ] therefore, monetary policy decisions need to be communicated very carefully and clearly. what is more, the lines between the two types of forward guidance i have laid out may be less clear - cut in economic reality. however, to keep it simple, i will squarely attribute the communication provided by the eurosystem and many other central banks to forward guidance of the first type. today, i would like to reflect on the experience we have made in the last few years, but i will also discuss possible pros and cons of the second, more daring type of forward guidance. i will close with some remarks on monetary policy in the euro area. 2 clarifying the reaction function in recent years, the eurosystem ’ s forward guidance evolved and, at times, communicated the governing council ’ s expectations on both the lift - off of policy rates and the duration of asset purchases. with the introduction of the asset purchase programme ( app ) in 2015, guidance was given along two dimensions by providing a timeframe and outlining the necessary progress of inflation towards our policy aim. the calendar - based component was easy to communicate and understand. and the state - contingent element acted like an automatic adjustment mechanism to economic news. if incoming data indicated a delay in the firming of inflation towards our policy aim, it implied continuation of net asset purchases beyond the calendarbased component. later, the forward guidance on policy rates was linked to the duration of the eurosystem ’ s net asset purchases. a prolongation of these purchases shifted the timing of the first rate hike further into the future. this connection was well - understood and worked accordingly. indeed,