## Current Issues in Forward Guidance

_IMF Notes, August 26, 2026_

## Source details

**Canonical URL:** [Current Issues in Forward Guidance](https://www.imf.org/en/publications/imf-notes/issues/2026/08/25/current-issues-in-forward-guidance-578823)

## Other formats

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## Bibliographic details
- Authors: Tobias Adrian
- Published: August 26, 2026
- Series: IMF Notes
- DOI: https://doi.org/10.5089/9798229056717.068

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### Core findings
- Forward guidance, or forward-looking monetary policy, is an essential part of policymakers’ toolkits, yet there is a need to carefully define its scope.
- Two forms of forward guidance exist with a clear distinction between them:
  - explicit commitments about the future path of the monetary policy stance, and
  - communication about forecasts and the monetary authority’s reaction-function.
- Commitments to future rate paths designed for effective lower bound conditions can become costly in an environment marred by supply shocks, as seen during the postpandemic inflation period.
- Communication about the future path of policy rates should be state dependent and embedded in frameworks organized around clear objectives and risks.
- Grounding communication on specific scenarios can help convey how a particular policy mix would adjust as a result of varying combinations of inflation outcomes, demand shortfalls, and indicators of financial stress.
- Proper scenario-based communication can preserve monetary transmission, anchor expectations, and bolster accountability without creating artificially compressed market volatility or unnecessary constraints on future policy.
- Communicating risks adequately and clearly is key to preserving proper risk-taking incentives of financial institutions.

### Policy implications and recommendations
- Distinguish between commitment-based forward guidance and reaction-function communication when designing communication strategies.
- Avoid rigid commitments to future rate paths that can be costly under supply-shock environments; prefer state-dependent guidance.
- Embed forward guidance within frameworks that specify clear objectives and identify key risks.
- Use scenario-based communication to illustrate how policy would respond to combinations of:
  - inflation outcomes,
  - demand shortfalls, and
  - indicators of financial stress.
- Ensure communications do not artificially compress market volatility or impose unnecessary constraints on future policy decisions.
- Communicate risks clearly to preserve appropriate risk-taking incentives among financial institutions.

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## Content in this bundle

- **Current Issues in Forward Guidance; IMF Note No. 26/08; August 2026**
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_Source: https://www.imf.org/en/publications/imf-notes/issues/2026/08/25/current-issues-in-forward-guidance-578823_