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As a forex trader, it is important to keep a watchful eye on upcoming economic releases and speeches from Central Banks. A good economic calendar is vital for all traders, regardless of whether you are trading using fundamental analysis or technical chart analysis. It’s obvious why a fundamental trader would want to keep abreast all Central Bank news, but even the technical trader could benefit from knowing what the major Central Banks are doing.

How Central Banks Decide What Policy to Implement?

Usually each central bank has at its disposal breakeven numbers for inflation rate, economic growth (GDP) and other different macroeconomic indicators, such as unemployment rate, which are estimated in consonance with banks own methodology.

In addition, central banks compare them with the so called preferable values. In case some of these figures reach a breakeven number or begin to change together in one or the other direction, demonstrating a certain tendency in the economy, this is considered as a signal for the central bank, that adjustments have to be made to its monetary policy.

Central banks of developed nations usually have an acceptable level or a range, which inflation rate should not leave. For example, the Federal Reserve Bank and the European Central Bank have set an inflation rate target at 2% annually.