ECB's Rehn Advocates for Keeping Forward Guidance in Policy Toolkit

Deep News08-18 17:10

European Central Bank Governing Council member Olli Rehn has stated that forward guidance should remain a part of the ECB's policy toolkit. Rehn noted that forward guidance holds particular value in Europe, serving as an alternative to traditional interest rate cuts when monetary policy is constrained.

He pointed out that forward guidance proved its worth during previous periods of low inflation. When interest rates are constrained by the lower bound, this tool helps improve financing conditions by guiding bond yield movements.

Rehn also cautioned that there is a risk of overusing forward guidance, emphasizing that policymakers need to preserve their freedom to act in an environment marked by uncertainty.

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