can affirm that, among policymakers, there is no doubt that forward guidance helps to steer expectations. yet, the effects of forward guidance are not as straightforward as we might like them to be. unsurprisingly, the results depend on a few things : first, on the particular form of forward guidance chosen ; second, on the central bank ’ s credibility ; and, finally, on agents ’ private information and the general level of informational noise. although in practice forward guidance is rarely perceived in such pure terms, here i would like to distinguish between the so - called delphic and odyssean types. delphic guidance is a statement of how policymakers see interest likely to evolve, but it makes no promises about future policy actions. in odyssean guidance, by contrast, policymakers commit to some ( contingent ) actions in the future. the horizon of odyssean guidance can be state - contingent, have an end date, or even be left open - ended. for example, currently, the ecb ’ s forward guidance is that interest rates are expected to remain unchanged at least through the end of this year. research indicates that different types of forward guidance differ systematically in how they impact on expectations and reduce disagreements in the markets about the future path of interest rates. more detailed, specific forward guidance – such as time - and state - contingent odyssean guidance – seems to be more effective in guiding expectations. intuitively, this effect makes sense : such central bank communication tones down some of the informational noise and diminishes uncertainty. nonetheless, this statement should not be interpreted as advocating any particular type of guidance, as the effects should depend on the interest - rate environment in which we are living. thus, in times of low interest rates, we strengthen forward guidance and make it more explicit. when interest rates are not bounded ( and are, therefore, at higher levels ), we can rely on a ‘ lighter ’ form of guidance. going further, any discussion on forward guidance would be incomplete without touching upon the controversy regarding “ who is leading who ” in this “ game ” of exchanging information. is the 2 / 4 bis central bankers'speeches central bank leading the financial markets, or have central banks become overly dependent on the market reaction function? in other words, are we “ catering ” to the markets? meaning, are we putting the needs of financial markets – that is, mainly private investors – before the needs of the real economy

, and thus cause unwanted market reactions. the current monetary policy normalization is unprecedented, and well - structured communication ( providing guidance on how the central bank will proceed ) is needed to smooth the process. i believe that forward guidance has become an effective supplement to conventional tools ; should we need another monetary easing cycle soon, conventional instruments would arguably play a less prominent role than in previous downturns. to wrap up, i think it is safe to say that central bank communication has become a proper monetary policy tool. the statements following monetary policy meetings in every major central bank gather a substantial attention, and watchers analyse every sentence – down to the last word. 3 / 4 bis central bankers'speeches consequently, any change in communication – either what is said or what is left unsaid – is immediately noticed and widely interpreted. to water down the statements into less detailed, more “ reserved ” language would be, in my opinion, going backwards in terms of the pursuit of greater transparency and credibility. it is worth bearing in mind that the latter is directly linked to achieving the core price stability target. thank you. 4 / 4 bis central bankers'speeches