Rethinking Central Bank Communication in an Uncertain World

IMF Blog, August 26, 2026

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Author: Tobias Adrian
Date: August 26, 2026
Credit: simoncarter/iStock by Getty Images
Central thesis: In a world of frequent and faster-moving shocks, central bank communications should anchor expectations by explaining how policy responds to changing conditions, rather than committing to a fixed path.
Purpose: Explores principles for effective monetary policy communication as central banks adapt frameworks and tools to a more uncertain and shock-prone world.

During the low-inflation era after the global financial crisis, communication was dominated by forward guidance centered on precommitting to a likely future path of the policy rates.
Such commitments can be effective when policy is stuck at the lower bound and inflation expectations are drifting down.
Commitments may become costly when circumstances change (supply shocks, inflation surprises, abrupt shifts in the balance of risks) and may require policymakers to adjust course.
Result: Central bank communication has shifted toward explaining how policy will respond as economic conditions evolve and new data become available.

Central task: Communicating the reaction function—how policymakers interpret incoming data, weigh risks, and navigate tradeoffs between key central bank objectives.
Key inputs to the reaction function:
- The strength of underlying inflation
- The evolution of inflation expectations
- The nature of monetary policy transmission
Emphasis on “Data dependence”: central banks explain what data matter, how data shape decisions, and what future contingencies may mean.
Goal: Help the public understand the logic that guides a central bank’s decision-making.

Central banks convey views on the economic outlook through forecasts and scenarios because policy decisions are based on where the macroeconomy is expected to go.
Forecasts are not promises: in a shock-prone world, forecasts are subject to tremendous uncertainty.
If forecasts are communicated too precisely, or policy-rate projections are interpreted as commitments, revisions can be misinterpreted as policy reversals.
Scenarios can:
- Illustrate how policy might respond under different economic outcomes
- Reinforce that future decisions will depend on incoming data and evolving conditions

Forecasts should be accompanied by a clear explanation of risks.
Effectively communicating the reaction function helps the public understand how policy may respond under alternative economic outcomes.
Rate-path commitments should be exceptional and conditional, with clear escape clauses so that any conditional promise is clearly subordinate to the price-stability mandate.

Clear communication can anchor expectations and support accountability.
But more communication is not always better.
Rapid parsing of messages via social media, automated news analysis, and artificial intelligence means communications are parsed in real time.
Too much detail can lead markets to focus excessively on decoding the central bank rather than assessing fundamentals.
Hence conditionality relative to the evolving outlook is foundational.

The goal of central bank communication is not to eliminate volatility but to reduce uncertainty about how the central bank will respond, limiting surprises around policy decisions.
Volatility itself is not undesirable when asset prices move in response to new information about incoming macroeconomic data that shape the inflation and growth outlook.
Such volatility fosters the information content of expectations and can provide information to policymakers.

Successful communication depends on fostering a better understanding of the policy framework.
Central banks should be clear about:
- Objectives
- The reaction function
- Forecasts
Given the high degree of uncertainty globally, central banks need to be explicit about risks, with the goal of reflecting the degree of underlying macroeconomic uncertainty accurately.

Source: Rethinking Central Bank Communication in an Uncertain World, Tobias Adrian, August 26, 2026.