Forward Guidance Puzzle
Forward Guidance Puzzle — Why guidance sometimes moves markets more/less than models.
Definition
Forward Guidance Puzzle refers to why guidance sometimes moves markets more/less than models. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Policy reaction functions move discount rates and liquidity; this concept is one of the levers or constraints. When why guidance sometimes moves markets more/less than models shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what forward guidance puzzle is saying. If why guidance sometimes moves markets more/less than models moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Map the calendar, communication regime, and balance-sheet tools — words and paths both matter. Prefer a short written null hypothesis for Forward Guidance Puzzle: what would falsify the current reading in the next window?