Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates

In Episode 104 of Monetary Policy Explained with Fexingo, Lucas and Luna dig into why central banks are paying close attention to housing affordability ratios as a leading indicator for financial stability and inflation. They explore the link between the ratio of median home price to median income and the delayed transmission of higher interest rates to shelter costs in inflation indices. The host...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna take a deep dive into the Taylor Rule—the simple formula central bankers use to set interest rates based on inflation and output gaps. Using the current mid-2026 environment as a backdrop, they explain how the rule works, why it's been controversial since the 2007-2009 financial crisis, and how the Federal Reserve has adapte...

Episode 102 of Monetary Policy Explained with Fexingo dives into SOFR, the secured overnight financing rate that has replaced LIBOR as the benchmark for trillions in derivatives and loans. Lucas and Luna explain how SOFR is calculated from actual overnight Treasury repo transactions, why it behaves differently from the old unsecured rates, and what its recent movements imply about liquidity in the...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the term spread — the difference between short-term and long-term interest rates — and why central banks are watching it closely in mid-2026. They explain how a steepening or flattening term spread signals shifts in market expectations for growth, inflation, and policy. Using the current environment as context, the...

For episode 100 of Monetary Policy Explained with Fexingo, Lucas and Luna dive into one of the most powerful yet underappreciated tools central bankers use to read the economy: the Senior Loan Officer Opinion Survey, or bank lending survey. Instead of guessing what banks are doing, central banks ask them directly. Lucas breaks down how the Federal Reserve's quarterly survey captured tightening cre...

In episode 99 of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the secretive world of currency intervention. Central banks don't just set interest rates—they occasionally step directly into foreign exchange markets to influence their currency's value. Using recent examples like Japan's yen-buying operations in 2024-2025 and Brazil's real rally in early 2026, the hosts break down...

Episode 98 of Monetary Policy Explained with Fexingo. Lucas and Luna explore how central banks extract inflation expectations from market prices, focusing on the five-year, five-year forward breakeven inflation rate. They walk through the mechanics of nominal versus inflation-indexed bond yields, explain why the breakeven rate isn't a perfect forecast but a powerful signal, and discuss what recent...

Lucas and Luna drill into the expectations channel — how central banks influence the economy not through rate changes alone, but by shaping what people think the future holds. They use the Bank of Japan's 2016 yield curve control announcement and the Federal Reserve's 2022 forward guidance pivot as concrete cases. Lucas explains the academic theory from Michael Woodford's 'Interest and Prices', an...

In this episode, Lucas and Luna dig into the renewed central bank focus on the wage-price spiral in mid-2026. With labour markets still tight and services inflation sticky, policymakers worry that persistent wage growth could feed a self-reinforcing loop. Lucas explains the historical context—the 1970s experience and how it differs today—and walks through the specific data points the Fed, ECB, and...

Central banks have a new emergency tool that doesn't wait for a crisis. Lucas and Luna explain the Standing Repo Facility — a permanent backstop for overnight lending that the Fed introduced in 2021 and other central banks are now adopting. They walk through how the facility works in practice, why it replaces the ad-hoc repo operations of September 2019, and what it means for bank liquidity, money...

Episode 94 dives into tiered reserve remuneration, the monetary policy tool central banks deploy to balance rate hikes with bank profitability. Lucas explains how the Bank of England's 2022-2023 tiering helped UK lenders weather higher rates without crashing lending, while Luna points out why the European Central Bank's similar system didn't trigger the same debate. They break down the mechanism,...

Episode 93 of Monetary Policy Explained with Fexingo. Lucas and Luna drill into the zero lower bound on interest rates — a concept that seemed obsolete after 2015 but is suddenly relevant again as several advanced economies flirt with near-zero policy rates in mid-2026. They use the Bank of Japan's experience as the central case, showing how Japan spent nearly a decade at the ZLB before moving to...

In this episode of Monetary Policy Explained, Lucas and Luna dive into why central banks are increasingly focused on the labor force participation rate (LFPR) as a key indicator for inflation and policy decisions. Using the post-pandemic recovery as a case study, they explore how shifts in participation—especially among prime-age workers—affect wage pressures, potential output, and the neutral rat...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the quiet revival of the Term Auction Facility — a crisis-era tool that central banks are dusting off in the current liquidity landscape. They walk through how the TAF works (hint: it's not quite a discount window), why it lets banks borrow without the stigma of emergency lending, and what the December 2025 re-acti...

In Episode 90 of Monetary Policy Explained with Fexingo, Lucas and Luna explore macroprudential policy — the toolkit central banks use to prevent financial bubbles without raising interest rates for everyone. They dive into a real-world case: Sweden's 2010 experience with household debt, where the Riksbank used a loan-to-value cap on mortgages rather than hiking the policy rate. The episode explai...

Lucas and Luna dive into helicopter money—the controversial idea of central banks distributing cash directly to citizens. They trace its history from Milton Friedman's 1969 thought experiment to Japan's 2022-2024 cash handouts funded by monetary expansion. Lucas explains why it differs from QE, how the Bank of Japan's 'special cash payments' worked, and why the ECB and Fed have resisted it. The ep...

In this episode, Lucas and Luna dig into the neutral rate of interest—often called R-star—and why it has become a fixation for central bankers. They walk through the concept of the 'real' neutral rate, explain why it's invisible and must be estimated, and look at recent Fed research suggesting R-star may have risen to around 1.2 percent, up from pre-pandemic estimates near zero. The hosts explore...

In this episode, Lucas and Luna unpack r-star — the theoretical 'neutral' interest rate that neither stimulates nor restricts the economy. They explore why central banks are obsessed with pinpointing it, how the Federal Reserve's June 2026 Summary of Economic Projections showed a subtle uptick in the median estimate, and why a small change matters for rate decisions. The hosts walk through the deb...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna drill into a specific puzzle: why central banks in mid-2026 are fixated on rent inflation. They walk through the 2021-2024 shelter inflation surge that took CPI from 2% to over 9%, how rent lags market data by about 12 months, and why the Bureau of Labor Statistics' new tenants' rent index is giving policymakers heartburn. L...

In Episode 85 of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the credit channel of monetary policy — a mechanism that's getting fresh attention from central bankers in mid-2026. They anchor the discussion around a real-world case: the European Central Bank's April 2026 bank lending survey, which showed the steepest tightening of credit standards since 2012 outside of crisis pe...

Episode 84 of Monetary Policy Explained with Fexingo. Lucas and Luna break down how central banks actually set their key policy rate. We walk through the real mechanics: the standing facilities corridor, the role of the overnight index swap market, and why the effective federal funds rate sometimes drifts away from the target. Using the ECB's deposit facility rate and the Fed's interest on reserve...

Episode 83 of Monetary Policy Explained dives into the Federal Reserve's overnight reverse repurchase agreement facility (ON RRP). Lucas and Luna unpack how this tool works—like a parking lot for money market funds—and why its rapid decline from $2.5 trillion in 2024 to under $100 billion by mid-2026 signals a fundamental shift in banking system liquidity. They explore the mechanics: the Fed sells...

Episode 82 of Monetary Policy Explained: Central Banks, Money Supply, and Interest Rates. Lucas and Luna dig into the yield curve slope—the gap between short-term and long-term bond yields—and why it has become a hotter topic than the curve's absolute level. They walk through the mechanics: how a flattening slope can signal tighter financial conditions even when the central bank hasn't moved, and...

Episode 81 of Monetary Policy Explained dives into the Sahm Rule, a real-time recession indicator developed by former Fed economist Claudia Sahm. Lucas and Luna break down how this rule works—triggering when the three-month average unemployment rate rises half a percentage point above its 12-month low—and why it has caught the attention of central bankers in 2026. They explore its track record, in...

In this episode of Monetary Policy Explained, Lucas and Luna drill into a phenomenon that keeps central bankers up at night: the services supercycle. Using the post-pandemic inflation in the euro area as a case study, they unpack why services prices have been stickier than goods prices, how the European Central Bank's rate path reflects that reality, and what the 'supercycle' label actually means...