Forward guidance The non-standard tool on which central bankers are most likely to rely in the next easing cycle is forward guidance, or communication about the expected or intended future path of the policy rate. The Fed used variants of forward guidance in the Greenspan era, for example, in references to keeping rates low for a considerable period"(Federal Open Market Committee 2003). Even earlier, a number of central banks experimented with forward-looking policy commitments, a notable case being the Bank of Japan's zero-interest-rate policy (ZiRP), in which the boj said that it would not lift rates from zero until certain conditions had been met (Bank of Japan, 1999). The prices of longer-term financial assets(including those most closely tied to economic activity, such as corporate bonds, mortgages, and stocks)depend on not only the current setting of the policy rate but on its entire expected future path. Consequently, central bank"open-mouth operations" that influence market expectations of future policies can affect financial conditions today, even if the short-term policy rate is close to its effective lower bound Guthrie and Wright, 2000) Forward guidance comes in a number of forms. A useful distinction is between Delphi and Odyssean forward guidance( Campbell et al., 2012). Delphic guidance is a simple statement of how monetary policymakers see the economy and interest rates as likely to evolve. Delphic guidance is advisory only and makes no promises about future policy. In contrast, Odyssean guidance-the phrase is motivated by Odysseus's decision to tie himself to the mast to be able to resist the calls of the Sirens--is intended to pre-commit the central bank to some(possibly contingent) set of future policies The goals of Delphic and Odyssean guidance are different. Delphic guidance-as for example seen in the Fed's famous dot plot, which shows the interest-rate forecasts of individual FOMC participants--is designed primarily to help the public and market participants understand the committee's outlook, reaction function, and policy plans. More informally central bankers' public remarks about the likely course of the economy and policy are usuall Delphic in intent. Increasingly, central banks are incorporating Delphic guidance into their communication strategy during normal times this development primarily reflects trends to increased transparency by central banks, rather than the emergence of the Zlb as an important5 Forward guidance The non-standard tool on which central bankers are most likely to rely in the next easing cycle is forward guidance, or communication about the expected or intended future path of the policy rate. The Fed used variants of forward guidance in the Greenspan era, for example, in references to keeping rates low for “a considerable period” (Federal Open Market Committee, 2003). Even earlier, a number of central banks experimented with forward-looking policy commitments, a notable case being the Bank of Japan’s zero-interest-rate policy (ZIRP), in which the BOJ said that it would not lift rates from zero until certain conditions had been met (Bank of Japan, 1999). The prices of longer-term financial assets (including those most closely tied to economic activity, such as corporate bonds, mortgages, and stocks) depend on not only the current setting of the policy rate but on its entire expected future path. Consequently, central bank “open-mouth operations” that influence market expectations of future policies can affect financial conditions today, even if the short-term policy rate is close to its effective lower bound (Guthrie and Wright, 2000). Forward guidance comes in a number of forms. A useful distinction is between Delphic and Odyssean forward guidance (Campbell et al., 2012). Delphic guidance is a simple statement of how monetary policymakers see the economy and interest rates as likely to evolve. Delphic guidance is advisory only and makes no promises about future policy. In contrast, Odyssean guidance—the phrase is motivated by Odysseus’s decision to tie himself to the mast to be able to resist the calls of the Sirens—is intended to pre-commit the central bank to some (possibly contingent) set of future policies. The goals of Delphic and Odyssean guidance are different. Delphic guidance—as for example seen in the Fed’s famous “dot plot,” which shows the interest-rate forecasts of individual FOMC participants—is designed primarily to help the public and market participants understand the committee’s outlook, reaction function, and policy plans. More informally, central bankers’ public remarks about the likely course of the economy and policy are usually Delphic in intent. Increasingly, central banks are incorporating Delphic guidance into their communication strategy during normal times; this development primarily reflects trends to increased transparency by central banks, rather than the emergence of the ZLB as an important