RUSSIAN JOURNAL OF MONEY AND FINANCE 84 DECEMBER 2018 Fear of Forward Guidance * Alex Isakov, VTB Capital alex.isakov@vtbcapital.com Petr Grishin, VTB Capital petr.grishin@vtbcapital.com Oleg Gorlinsky, VTB gorlinsky@vtb.ru Tis article is a response to the review of Adrian et al. (2018) by Yudaeva (2018), which summarizes the case of the Bank of Russia against the publication of key rate forecasts, a communication strategy known as conventional forward guidance. We believe that the case in favour of publishing the Bank of Russia’a key rate forecast is at present not stated sufciently coherently. Our note attempts to fill this gap. Extending the argument put forward by Adrian et al. (2018) we provide a comprehensive review of the working papers, staf notes, and leadership comments related to interest rate expectations and monetary policy communication by four central banks that have had practical experience with the application of conventional forward guidance. We conclude with an evaluation of the validity of the commonly voiced concerns regarding its adoption in Russia, based on the reviewed literature. Keywords: infation targeting, monetary policy, central bank communications JEL Codes: E58 Citation: Isakov, A., Grishin, P., Gorlinsky, O. (2018). Fear of Forward Guidance. Russian Journal of Money and Finance, 77(4), pp. 84–106. doi: 10.31477/rjmf.201804.84 1. Introduction Monetary policy is a conservative area. New approaches and ideas undergo careful inspection, scrutiny and testing before being considered for adoption. Te latest changes to the monetary policy framework in Russia were the transition to a freely floating exchange rate, and an inflation targeting regime in 2014. Tis setup is generally considered as preferable, as it allows for a smoother absorption of external shocks. However, such consensus is relatively recent – in the early 1990s the debate regarding the suitability of flexible (and, ultimately, floating) exchange rate arrangements for emerging markets was far from being settled (see * We are grateful to Nadezhda Ivanova and Olga Kuvshinova (of the Bank of Russia) for their invaluable help and support while working on this paper, and also to Alexey Khazanov (of Boston College), Nikolay Frolov and Pavel Pikulev (of Sberbank) who kindly shared their ideas and comments.