Forward guidance and the limits of public information - CEPR

Central bank forward guidance—public communication about the likely future path of policy rates—has become a standard tool for shaping market expectations. CEPR's analysis examines the limits of this approach, focusing on what happens when guidance relies on information that is already publicly available to all market participants.

The core insight is that guidance drawn from public data may add little new information to markets that have already processed the same figures. In that case, the communication can do less to move expectations or influence financial conditions than policymakers might intend. The research also points to the broader question of how much central bank communication depends on genuinely new information—such as policymakers' own assessments—rather than a restatement of widely known data.

For markets, the takeaway is that not all guidance carries equal weight. The relevance likely varies with how much a statement reveals beyond consensus expectations. Watching how markets react to guidance relative to the underlying data can offer a useful signal of whether the communication is adding information or simply echoing what is already priced in.