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

Episode 54 of Monetary Policy Explained with Fexingo: How Central Banks Steer the Yield Curve. Hosts Lucas and Luna examine the Bank of Japan's 2022-2024 yield curve control experiment—a case study in the limits of this powerful tool. They break down how the BOJ capped 10-year Japanese government bond yields at 0.25%, the market pressure that forced three adjustments, and the eventual unwind in Ma...

Episode 53 of Monetary Policy Explained with Fexingo dives into the mechanics of interest on excess reserves (IOER) and its role as the de facto policy rate for the Federal Reserve since 2008. Lucas and Luna break down how IOER works, why the Fed uses a floor system, and how it differs from the old corridor system of the pre-2008 era. They discuss the September 2019 repo market spike, when the eff...

In this episode of Monetary Policy Explained, Lucas and Luna dive into forward guidance — one of the most powerful yet misunderstood tools in a central banker's kit. They break down the Bank of Canada's 2020 'lower bound' guidance as a concrete example, showing how a simple sentence about holding rates until slack is absorbed moved bond markets by 20 basis points. The hosts explore the credibility...

Episode 51 of Monetary Policy Explained with Fexingo dives into moral suasion—the soft power central banks use to influence markets without changing rates or reserves. Lucas and Luna unpack how the Bank of Japan's 2022 yield defense relied on jawboning, why the Federal Reserve's 2023 whispers about bank capital ratios moved credit desks, and where this tool works best (and fails hardest). Specific...

Episode 50 of Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates. Today, Lucas and Luna dig into a quietly seismic shift in central banking: the move to raise long-term inflation targets. The Bank of Canada recently completed a five-year framework review and set a new 2.5 percent target, up from 2.0 percent. The Federal Reserve has internally debated a similar...

In Episode 49 of Monetary Policy Explained with Fexingo, Lucas and Luna dig into tiered reserve remuneration—a tool central banks use to encourage lending without cutting the policy rate below zero. They walk through the European Central Bank's 2019 tiering system, which exempted a portion of banks' excess reserves from negative rates, saving the banking sector roughly €4 billion per year. Lucas e...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna explore credit easing—a targeted form of quantitative easing where central banks buy specific private-sector assets to unstick particular credit markets. Using the Federal Reserve's 2020 Corporate Credit Facilities as the central case, they explain how the Fed bought individual corporate bonds and bond ETFs to reopen the pri...

In Episode 47 of Monetary Policy Explained with Fexingo, Lucas and Luna dive into the often-overlooked tool of reserve requirements. Once a cornerstone of central banking, reserve requirements have fallen out of favor in many advanced economies — but not everywhere. Lucas explains how the Fed, ECB, and People's Bank of China have diverged on this tool, and why a 0% requirement doesn't mean zero po...

Episode 46 of Monetary Policy Explained with Fexingo dives into average inflation targeting — the framework adopted by the Federal Reserve in 2020 and still debated globally. Lucas and Luna break down how it differs from traditional inflation targeting, using the Fed's 2020 framework review as a case study. They explore why the Fed wanted to allow inflation to run moderately above 2 percent for a...

Most people think central banks target a single inflation number like 2 percent. In practice, many of the world's most influential central banks—including the Federal Reserve, the European Central Bank, and the Bank of Japan—operate with an explicit or implicit inflation targeting band. This episode of Monetary Policy Explained with Fexingo dives into why bands matter more than a single point. Luc...

Episode 44 of Monetary Policy Explained unpacks the countercyclical capital buffer (CCyB), a macroprudential tool that central banks use to cool credit markets during booms and release capital during downturns. Lucas and Luna walk through how the Bank of England activated its CCyB in 2025, raising it to 2 percent to dampen a commercial real estate lending surge, and how the European Central Bank f...

In this episode, Lucas and Luna break down how central banks are navigating a period of high uncertainty in mid-2026. They focus on the Bank of Japan's recent decision to hold its policy rate at 0.5 percent despite rising inflation, contrasting it with the Federal Reserve's data-dependent stance and the European Central Bank's gradual tightening path. The hosts explain how uncertainty around trade...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna break down the mechanics of how central banks actually set the interest rate they pay on commercial bank reserves. Using the Federal Reserve's IORB rate as a concrete example, they explain why this tool became dominant after 2008, how it creates a floor for short-term rates, and what happens when the Fed adjusts IORB by 25 b...

Episode 41 of Monetary Policy Explained with Fexingo. Lucas and Luna dive into loan-to-value (LTV) caps—a targeted macroprudential tool central banks use to rein in housing bubbles without raising interest rates for the whole economy. They anchor on New Zealand's experience in 2021, when the Reserve Bank of New Zealand tightened LTV limits on investors to 40% equity required, then reversed them in...

In this episode of Monetary Policy Explained, Lucas and Luna dive into the mechanics and real-world impact of central bank currency swap lines. Using the 2020 COVID crisis as a case study, they explore how the Federal Reserve activated swap lines with 14 central banks—including the Bank of Korea, the Riksbank, and the Reserve Bank of Australia—to stabilize dollar funding markets globally. Lucas ex...

Episode 39 of Monetary Policy Explained with Fexingo dives into a lesser-known tool in central bankers' kit: targeted lending programs. Instead of cutting the broad policy rate, central banks can offer cheaper credit to specific sectors — think small business loans, green mortgages, or export financing. Lucas breaks down how the Bank of England's Term Funding Scheme for Small and Medium Enterprise...

Episode 38 of Monetary Policy Explained dives into central bank digital currencies (CBDCs) as a fresh policy tool. Lucas and Luna explore how CBDCs could transform monetary policy transmission, using China's digital yuan as a case study. They discuss programmability features like expiry dates and spending restrictions, the potential for negative interest rates at the retail level, and the implicat...

In episode 37 of Monetary Policy Explained, Lucas and Luna unpack the most controversial central bank tool that almost never gets used: direct money transfers to households, popularly known as helicopter money. Lucas traces the idea from Milton Friedman's 1969 thought experiment to its real-world trial in Brazil's 2020 'Coronavoucher' program, which sent 250 reais per month to 65 million people, o...

Episode 36 of Monetary Policy Explained dives into negative interest rates – a policy that flips conventional banking on its head. Lucas and Luna examine the European Central Bank's experience with negative rates from 2014 to 2022, including the impact on bank profits, lending, and savings. They break down why central banks turn rates negative, how the policy transmits to the real economy, and the...

Episode 35 of Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates takes you inside the central bank toolkit for tiered reserve remuneration. Lucas and Luna explore how the European Central Bank's two-tier system for excess reserves works, why the Bank of Japan uses a three-tier structure, and what the Federal Reserve's decision to pay interest on reserves means...

When central banks want to cool a housing bubble without raising interest rates, they reach for a tool called the loan-to-value cap. In this episode, Lucas and Luna explain how LTV limits work by examining the case of New Zealand's Reserve Bank, which in 2021 imposed a 40 percent deposit requirement on investors buying in Auckland. They walk through why standard rate hikes can backfire in a housin...

In this episode of Monetary Policy Explained with Fexingo, Lucas and Luna dive into Operation Twist, a lesser-known but powerful tool central banks use to flatten the yield curve without changing the policy rate. They walk through the 2011-2012 US example where the Federal Reserve sold short-term Treasuries and bought long-term bonds to lower long-term borrowing costs. Along the way, they discuss...

Episode 32 of Monetary Policy Explained digs into a quiet but powerful central bank tool: yield curve control. Lucas and Luna explore how the Bank of Japan has managed to cap long-term bond yields since 2016, why it matters for global bond markets, and whether the Federal Reserve or ECB could ever adopt similar tactics. With concrete examples from the BOJ's experience, they unpack the mechanics, t...

Episode 31 of Monetary Policy Explained with Fexingo drills into standing facilities—the lending and deposit windows that keep short-term interest rates within a central bank's target corridor. Lucas walks through how the ECB's marginal lending facility and deposit facility act as a ceiling and floor for overnight rates, using real examples from June 2026 when the ECB narrowed its corridor. Luna p...

Episode 30 of Monetary Policy Explained with Fexingo. Lucas and Luna explore how central banks influence inflation and economic behavior through expectations, not just interest rate changes. Using the Bank of Japan's experience with deflation and the Federal Reserve's post-2021 inflation fight as cases, they unpack the concept of 'inflation expectations anchoring' and how central banks communicate...