Forward Guidance
When a central bank tells markets what it is likely to do with interest rates in the future.
In plain English
When a central bank tells markets what it is likely to do with interest rates in the future.
Forward guidance is a central bank steering with words. Saying 'rates will stay low for an extended period' can push down longer-term rates today, without any actual change.
Markets react to shifts in guidance as much as to rate moves. A single changed phrase in a statement can move a currency.
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