How Central Banks Use Forward Guidance to Shape Markets

Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates · Jun 15, 2026 · 6m · transcript

In this episode of Monetary Policy Explained, Lucas and Luna dive into forward guidance — one of the most powerful yet misunderstood tools in a central banker's kit. They break down the Bank of Canada's 2020 'lower bound' guidance as a concrete example, showing how a simple sentence about holding rates until slack is absorbed moved bond markets by 20 basis points. The hosts explore the credibility problem: what happens when guidance is broken, as the Federal Reserve learned in 2021 with its 'transitory inflation' call. They contrast explicit date-based guidance…