# How Central Banks Use Forward Rate Agreements

Page: https://stenobird.com/podcast/monetary-policy-explained-with-fexingo-central-banks-money-supply-and-interest-rates-7872013/how-central-banks-use-forward-rate-agreements
Text version: https://stenobird.com/podcast/monetary-policy-explained-with-fexingo-central-banks-money-supply-and-interest-rates-7872013/how-central-banks-use-forward-rate-agreements.md
Podcast: [Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates](https://stenobird.com/podcast/monetary-policy-explained-with-fexingo-central-banks-money-supply-and-interest-rates-7872013)
Published: 2026-07-13T07:29:04+00:00
Episode link: https://audio.fexingo.com/business/monetary-policy-explained/episode-0108.mp3
Audio file: https://audio.fexingo.com/business/monetary-policy-explained/episode-0108.mp3
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Duration seconds: 468

## Resource

In this episode of Monetary Policy Explained, Lucas and Luna break down how central banks use forward rate agreements — specifically Overnight Indexed Swaps — to extract market-implied policy expectations. They look at the Bank of England's 2023-2024 experience as a case study, showing how the wedge between SONIA swap rates and actual Bank Rate revealed whether markets believed the central bank's tightening cycle. Lucas walks through a concrete example: in September 2023, OIS pricing implied a peak Bank Rate of 5.5%, while the MPC had only guided to 5.25% — a 25 basis point gap that signaled credibility issues. Luna brings in the ECB's use of €STR OIS during the 2022 rate hiking cycle to compare approaches. The hosts discuss why central banks care about FRAs: they provide high-frequency, forward-looking data on where the market thinks policy is headed, which can either validate or challenge the central bank's own guidance. They also touch on the limitations — liquidity in longer-dated FRAs and the influence of term premia. The episode closes with a natural, topic-tied donation segment asking listeners to support the ad-free show. #MonetaryPolicy #CentralBanks #ForwardRateAgreements #OvernightIndexedSwaps #SONIA #ESTR #BankOfEngland #ECB #InterestRates #PolicyExpectations #MarketImpliedRates #TighteningCycle #MonetaryPolicyTransmission #CentralBankCommunication #Economics #FexingoEconomics #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo

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