Rethinking Central Bank Communication in an Uncertain World
In a world of frequent shocks, central bank communications should anchor expectations by explaining how policy responds to changing conditions, rather than committing to a fixed path
In a world of frequent and faster-moving shocks, where uncertainty is high and markets react instantly, central banks face a fundamental communications challenge: how to help the public understand monetary policy objectives while explaining how policy may evolve as economic conditions change. In this regard, explaining the policy framework, the reaction function of the central bank, and the way in which economic uncertainty and risks play into alternative scenarios have become the foundation of the central banker’s communications playbook.
As central banks adapt their policy frameworks and tools to a more uncertain and shock-prone world, it is only natural that they are also reassessing how best to communicate policy frameworks and talk about the conjuncture. A new IMF note explores these questions and sets out principles for effective monetary policy communication.
SEPTEMBER 14, 2026 – IMF
Perils of commitment
During the low-inflation era that followed the global financial crisis, communication was dominated by forward guidance, centered on precommitting to a likely future path of the policy rates. Such an approach can be effective when policy is stuck at the lower bound and inflation expectations are drifting down. But commitments may become costly when circumstances change. Supply shocks, inflation surprises, or abrupt shifts in the balance of risks may require policymakers to adjust course.
As a result, central bank communication has shifted toward explaining how policy will respond as economic conditions evolve and new data become available.
