How should the central bank control expectations in the conditions of war? Faced with geopolitical shocks, supply chain disruptions and extreme uncertainties, central banks must clearly explain their "decision-making logic" and how they react to new data, instead of committing to a set path or announcing rigid forecasts. The commitment to maintain a fixed interest rate during a rapid change of conditions destroys the flexibility of the policy maker; Compliance with the previous promise could harm the goal of price stability, and a sudden change of direction could be interpreted as instability. Therefore, the policy maker must reveal his response role and show how decisions are related to inflation data and expectations; A communication approach that contains important lessons for monetary policy in Iran as well. To manage public expectations, tools such as alternative scenarios and qualitative description of risks are more effective than traditional guidelines; Because they show that events of a different nature (such as a demand shock versus a supply shock) require different policy responses. In supply shocks (such as energy price jumps), an immediate increase in interest rates cannot solve the commodity shortage and may unnecessarily pressure production. However, if the initial shock turns into a general belief of continued inflation, the risk of stabilizing expectations and a price-wage spiral increases. In such a situation, the optimal policy is not a gradual movement, but an initial tolerance of the shock up to a certain level and then a "decisive and timely turn" to a contractionary policy. This rotation, if applied at the right time, will curb inflation in the expectations channel without imposing a heavy recession and will allow for a "soft landing". The task of the central bank is not to eliminate uncertainty, but to manage it through reliable communication, conditional decision-making and measured response. Full text of the channel.

How should the central bank control expectations in the conditions of war? Faced with geopolitical shocks, supply chain disruptions and extreme uncertainties, central banks must clearly explain their "decision-making logic" and how they react to new data, instead of committing to a set path or announcing rigid forecasts. The commitment to maintain a fixed interest rate during a rapid change of conditions destroys the flexibility of the policy maker; Compliance with the previous promise could harm the goal of price stability, and a sudden change of direction could be interpreted as instability. Therefore, the policy maker must reveal his response role and show how decisions are related to inflation data and expectations; A communication approach that contains important lessons for monetary policy in Iran as well. To manage public expectations, tools such as alternative scenarios and qualitative description of risks are more effective than traditional guidelines; Because they show that events of a different nature (such as a demand shock versus a supply shock) require different policy responses. In supply shocks (such as energy price jumps), an immediate increase in interest rates cannot solve the commodity shortage and may unnecessarily pressure production. However, if the initial shock turns into a general belief of continued inflation, the risk of stabilizing expectations and a price-wage spiral increases. In such a situation, the optimal policy is not a gradual movement, but an initial tolerance of the shock up to a certain level and then a "decisive and timely turn" to a contractionary policy. This rotation, if applied at the right time, will curb inflation in the expectations channel without imposing a heavy recession and will allow for a "soft landing". The task of the central bank is not to eliminate uncertainty, but to manage it through reliable communication, conditional decision-making and measured response. Full text of the channel.