which is now headed by Governor Mark Carney

Recall that the Fed, which is headed by Chairman Ben Bernanke,Implant has been previously saying that it planned to keep interest rates exceptionally low for an extended period back when the United States economy was still struggling to recover from the recession. When the country had already shown signs of progress in the past few months, the Fed switched its stance and announced that it plans to taper down bond purchases towards the end of the year. With these remarks typically made during interest rate statements, the Federal Reserve has given the markets an idea of what they plan to do with future monetary policy.

Just recently, the BOE, which is now headed by Governor Mark Carney, declared that interest rate hikes will not take place in the next couple of years. This was followed by the ECB rate statement,office design in which Governor Mario Draghi noted that interest rates will be kept low for an extended period.

These central bank heads have decided to practice forward guidance for two main reasons.

First is that they want to align market expectations with central bank plans.key storage In doing so, they are able to reduce speculations regarding yields, and consequently prevent unwanted volatility in the bond markets. With that, they are able to keep borrowing costs more stable, as these will now be driven by central bank plans instead of market speculations.

Next is that they want to extend the impact of their current monetary policy stance. Although both central banks have already lowered interest rates close to zero, adopting forward guidance allows them to make the most of the low-interest rate environment by giving banks and lenders an idea of how to keep lending rates low. By saying that benchmark rates will be kept low for a number of years, lending institutions can make the necessary adjustments in their loan rates and could be convinced to lower borrowing costs even on longer-term loans.

In forex, traders now have a clearer idea of how monetary policyvitamin ewill play out in the coming years.