The central bank hinted a rate cut is coming. Here's why markets move before it actually happens.

Originally reported as: “Monetary board signals openness to policy rate cut as inflation eases, bond yields slide on the news”

The central bank's monetary board signaled it is now open to cutting its benchmark interest rate in the coming months, without actually cutting it yet, and markets reacted almost immediately even though nothing about current borrowing costs changed that day. This kind of signaling is often called forward guidance, where a central bank communicates its likely future direction to help households, businesses, and investors plan ahead rather than being surprised by a sudden move. Bond yields, currency values, and even mortgage rate offers can shift on the signal alone, since financial markets are constantly pricing in what is expected to happen next, not just what has already happened. For everyday borrowers and savers, understanding the difference between a signal and an actual rate change matters, since your loan or deposit rate today has not moved yet just because the central bank hinted that it might.