LONDON (Reuters), – The Bank of England Deputy governor Ben Broadbent indicated Wednesday that policymakers at central banks should give forward guidance that is easily understood. He was speaking in a tone that differs from other suggestions by the BoE to abandon guidance.

Broadbent stated that central banks may need to provide more details about their plans to respond to changes in the economic environment. This is known as the reaction function.

In November, Governor Andrew Bailey stated that he can imagine returning to those days when he offered no forward guidance following criticisms of communications by the BoE which misled some investors in advance of central bank interest rate decisions.

Broadbent stated that future interest rates will affect demand and that policymakers have an interest to act appropriately when economic news is reported. Broadbent made the remarks in a speech at the National Institute of Economic and Social Research.

You could do this in many ways: speeches, simulations, or public interest rate path publications.

“But whatever the medium, monetary authorities need always to think that the message – not least the point that future policy will depend on how the outlook for inflation evolves – is well understood,” he said.

Broadbent spoke briefly also about an increase in inflation which could reach nearly 9%, more than four-times the BoE target of 2%. According to government fiscal forecasters this is due to the jump in energy prices.

He said that “as a net importer large of manufactured and commodity goods, it is doubtful that the UK ever suffered an external impact to its real income on such a scale.”

It will lead to a difficult combination of higher inflation and weaker domestic demand, according to the narrow view of monetary policies.