How Central Banks Use the Yield Curve as a Policy Tool

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · May 23, 2026 · 8m · transcript

Episode 7 of Monetary Policy Explained with Fexingo digs into the yield curve—not the inverted one you keep hearing about, but how central banks actually use the entire curve to steer borrowing costs and signal future policy. Lucas explains why the Fed stopped targeting just the short end after 2008 and how tools like Operation Twist and forward guidance rewrite the yield curve's shape. Luna asks whether the curve still works when central banks buy bonds directly. The hosts trace the mechanism from a 2020 repo-market spike to the flattening pressures of 2025-2026, using concrete examples…