How Central Banks Use Forward Guidance to Manage Expectations

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jul 28, 2026 · 8m · transcript

In this episode, Lucas and Luna dive into forward guidance—one of the most powerful communication tools central banks have. Using the Federal Reserve's 2013 'taper tantrum' as a cautionary tale, they explain how promises about future policy rates and asset purchases shape financial conditions today. The hosts break down the difference between Delphic and Odyssean guidance, why the Bank of Japan's yield curve control is a form of forward guidance on steroids, and how the ECB tried to anchor expectations with rate path guidance during the pandemic. They also discuss the…