Key points
- Can be calendar-based or outcome-based.
- Helps anchor long-term rates without immediate action.
- Commitment devices can enhance credibility.
Example
A statement saying rates stay at zero until “labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment” is explicit outcome-based guidance.
In history
In 2020, the Fed adopted outcome-based guidance, pledging to keep rates near zero until inflation moderately exceeded 2% and employment reached maximum levels.
Related terms