European Central Bank President Christine Lagarde insisted that monetary policy decisions would be made at each meeting. This means that the outcome of one meeting would not predetermine the direction of the next. Federal Reserve Chairman Kevin Warsh went further, explicitly rejecting forward guidance. Neither was willing to comment further on the possible future direction of interest rates. Forward guidance has a notorious reputation. One could argue that central banks have provided too much guidance in the past, and now they've swung to the other extreme—providing too little. In the past, central banks often used carefully worded language to foreshadow policy direction to the market, but when circumstances change drastically, these foreshadowings have become promises that must be kept. This shift is understandable. The economic outlook can change abruptly, and forward guidance can become a constraint when circumstances change. However, the solution to the problem of excessive guidance is not to abandon it entirely. To understand why, consider how financial markets form expectations about monetary policy. Markets rely on multiple sources of information, including economic data, official communications from central banks, and statements from individual policymakers. The degree to which the market values each type of information depends on its informational value. The more reliable the information, the higher the weight the market assigns it. Well-prepared official communications from central banks convey the policy committee's collective assessment of the economic outlook. They let the market know how policymakers view the economy and how they might respond to new information. Without this signal, the market has to rely more heavily on newly released economic data and statements from individual policymakers. But data is inevitably subject to error and revision; initially released figures are often corrected later, and the direction may even reverse. And individual policymakers express their own views, which may not represent the views of the entire policy committee. Moving away from all forms of forward guidance has two consequences. First, the market may become overly sensitive to new data, as exemplified by energy prices in the current environment. However, knowing that energy prices have risen sharply does not necessarily mean that central banks will tighten policy significantly. Central banks need to determine whether this shock is temporary or persistent. In the absence of clearer guidance, markets can only infer the answer themselves, and they may price in more monetary policy tightening than reasonable. Secondly, markets place too much weight on the comments of individual policymakers, which may not reflect the collective judgment of the committee. Without official guidance, even casual remarks in interviews can have a disproportionately large impact on market expectations. A thoughtless comment can be interpreted as a signal of a policy shift. The combination of these two factors creates a wedge between market expectations and policymakers' own judgment on the path of interest rates. I believe this is happening. Markets are pricing in significant further tightening, although there is currently insufficient evidence that rising energy prices are transmitting to wages and potential inflation. In my view, central banks are becoming more cautious about the necessity of further tightening. In other words, the pace of tightening bets by the market may be ahead of the central bank's true intentions. Central banks now face a dilemma: follow market expectations, risking over-raising interest rates; or disappoint the market, risking market turmoil. The former could sacrifice economic growth, while the latter could destabilize financial stability. This creates a paradox: central banks abandoning forward guidance, partly to preserve their flexibility, may end up becoming prisoners of market expectations. The intention is to give themselves room to maneuver, but ultimately they are forced to passively follow market pricing. Even moderately mild forward guidance can help address these issues. Well-prepared central bank statements reflecting the policy committee's judgment can give the market a clearer understanding of the outlook. The key lies in the boundaries of the wording: describe only the framework of judgment, without committing to specific actions. For example, the ECB could explain that rising energy prices have pushed up overall inflation, but the second-round effect remains limited; it could then indicate what changes in wages or underlying inflation would make further tightening more likely. This provides useful guidance without committing to a specific interest rate path. The market thus knows which variables to watch, rather than guessing the central bank's intentions. The goal should be to help the market understand the central bank's reaction function without tying the hands of policymakers. There is considerable room between committing to a specific interest rate path and remaining silent about the future.