## Rethinking Central Bank Communication in an Uncertain World

_IMF Blog, August 26, 2026_

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**Canonical URL:** [Rethinking Central Bank Communication in an Uncertain World](https://www.imf.org/en/blogs/articles/2026/08/26/rethinking-central-bank-communication-in-an-uncertain-world)

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## Bibliographic details
- Authors: Tobias Adrian
- Published: August 26, 2026

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### Overview
- 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.

### Perils of commitment
- 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.

### Understanding reaction functions
- 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.

### Explaining risks and uncertainty
- 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

### Communication for a shock-prone world
- 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.

### More isn’t always better
- 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.

### Volatility’s value
- 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.

### Speaking with humility
- 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.*

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## References

- [IMF note](https://www.imf.org/en/publications/imf-notes/issues/2026/08/25/current-issues-in-forward-guidance-578823)

_Source: https://www.imf.org/en/blogs/articles/2026/08/26/rethinking-central-bank-communication-in-an-uncertain-world_