I had not been going to write any more now about the Reserve Bank’s investigation into the possible OCR leak (I voluntarily passed them hard but partial information; what conclusions they are able to draw from that information is up to them) and the related, more important, issues of how they handle releases, lock-ups etc. But overnight Marek Petrus, former communications director at the Czech central bank, got in touch and drew my attention to a couple of posts on the issue which he had put on his own very interesting blog, Lombard Rates. He has also left a substantial comment on my earlier post on reforming Reserve Bank releases.
Based on my experience, organizing lock-ups for interest rate-decision releases is not a standard, wide-spread practice among central banks.
As far as I know, few central banks provide information on rate decisions under embargo, be it via lock-ups or other means (the Czech National Bank, where I set up that lock-up regime for news agencies some years ago, is one of those few).
Still, lock-ups do make sense, but mostly for technical, complex matters that require a lot of explanation (a specific example is releasing Inflation Reports or Financial Stability Reports). Providing information on a rate decision and the main reasons behind such decision under an embargo longer than, say, 5-10 minutes is not worth the risk.
My suggestion for the RBNZ, or any central bank considering ways to employ or redesign an embargo technique, would be to organize the standard lock-ups only to provide detailed explanations on complex publications or complicated technical, regulatory matters. The most market sensitive information (such as the rate announcement) should either be released under no embargo at all, or be made available to a small group of journalists via a tight, 10-15 minute lock-up. That would help reporters get the facts right and avoid making a factual error under stress.
No market participant or analyst should have access to this sensitive kind of information before the official release. That to me is the first line of defense against an embarrassing information leak. Afterwards, an open press conference could be held for journalists and TV cameras, and a separate background seminar organized for analysts, to explain the decision and answer detailed questions. However, this press conference and the background seminar are, as rule held, only after a rate decision has been published, and has thus become part of public domain.
I agree with the gist of these comments, although I’m not sure about holding background briefings for analysts after the release. When we first did Monetary Policy Statements in New Zealand we did exactly that, but the sessions were not popular (clients wanted immediate explanations, and after that the market economists wanted to move on to other things). Perhaps more importantly, comments on the monetary policy outlook and projections should be made openly and on-the-record or not at all.
UPDATE: Petrus has got in touch to clarify what he meant about an analysts’ briefing:
I did not mean to suggest that a seminar for analysts should be organised behind closed doors (i.e. only on background).
Quite the opposite: It should be made public, streamed live as a video webcast and later made available online as a video recording. By writing about “background seminar”, I meant to say that background and detailed information about a policy decision and the latest forecast should be routinely provided by a central bank via such analyst meetings.
The most transparent central banks, such as Sweden’s Riksbank and the Czech National Bank, make such analyst meetings public by providing a live webcast and making the video recording available via online services such as YouTube for every member of the public to watch.
See for instance: https://www.youtube.com/playlist?list=PL7V-SFaHLX4LcIZjld51kktczHEj36hJ9
That would appear to be an excellent approach for our Reserve Bank to consider adopting.