Quantitative tightening and forward guidance need rethink, say economists

Forward guidance removes options to respond to shocks, say academics and experts

Balance sheet

Quantitative tightening and forward guidance need to be rethought, experts argued at a conference hosted by the Federal Reserve Bank of Atlanta on May 15.

Kristin Forbes, a professor of management and global economics at the Massachusetts Institute of Technology, said forward guidance locks central banks into policy. Recent experience, she said, shows central banks need to keep options open.

It becomes harder to pivot as economic situations change when you’ve issued forward guidance, said

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