General TradingF

Forward Guidance

Forward guidance is a communication tool used by central banks to influence market expectations about the future path of monetary policy. By signaling future interest rate intentions, central banks can impact borrowing costs, asset prices, and currency values before any policy change occurs.

Example

“The Fed Chair's forward guidance indicating that rates would remain higher for longer caused the dollar to strengthen and tech stocks to sell off, even though no actual rate change was announced.”