How Central Banks Use Forward Guidance

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Aug 21, 2026 · 8m · transcript

In this episode of Monetary Policy Explained, Lucas and Luna unpack forward guidance—the central bank's promise about future policy. They explore how it shapes market expectations, its power during the zero lower bound era, and its limits in a higher-inflation world. Using the Federal Reserve's 2013 taper tantrum and recent experiences from the ECB and Bank of Japan, they explain why communication has become a policy tool in its own right. Expect a close look at how phrases like 'patient' and 'dot plots' move markets, and why credibility is the real anchor…