Archive for February 21st, 2021

Notes From Underground: Does the Market Care About Forward Guidance?

February 21, 2021

Forward guidance is a key tool in the Federal Reserve’s arsenal, promoted in a speech long ago by Columbia University professor Michael Woodford at the Jackson Hole Symposium. In a previous communication, the central bank said, “Forward guidance is a tool that central banks use to provide communication to the public about the likely course of monetary policy.”

This tool allows the FED to establish a time-directed path for interest rates so that the MARKET does not suffer shocks from an upward surprise move in rates.

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