The ECB is rightly coming under pressure to tighten the rules governing communication and meeting engagements of its top officials with market participants.
The introduction of the speaking guide in October was clearly not enough.
Diaries of the ECB's top decision-makers reveal that some of them in the past year did not observe a standard, best-practice "purdah" period in the week before major policy and market decisions were scheduled to be taken.
The Financial Times reported on the diaries, obtained on the basis of a freedom of information request.
The ECB's October communications guidelines did require top ECB officials to refrain from making public speeches one week ahead of a policy meeting:
The members of the Executive Board re-affirm their adherence to the quiet period principle, whereby speeches and public remarks, given in the seven days prior to each scheduled monetary policy meeting of the Governing Council, should not be such as to influence expectations about forthcoming monetary policy decisions.
This is not the solution. The ECB should make this rule apply not only to speeches, but to any meetings or talks with outside parties. Better to schedule no meetings at all in that hot "purdah" period than to raise any kind of suspicion about officials discussing sensitive information in private with market operators. Holding no meetings ahead of a major policy decision is actually standard practice at other central banks, including the Bank of England, Bank of Canada and the Czech National Bank.
The ECB could follow the example of the Bank of England, whose code of conduct prohibits MPC members from giving speeches on monetary policy matters or meeting or talking to the media or other outside interests on such topics in the days before a policy announcement:
Particular care needs to be taken in the period between the Monday discussion and the announcement of the MPC decision on Thursday. During this period the policy decision will be crystallising, and members should avoid speaking with any media or market participants and should immediately notify the press office if they inadvertently do so.
Also members of the Bank of Canada's Governing Council observe a communications "blackout" around the announcement of the interest rate decision:
This "blackout" (or "no-comment") period begins one week before the announcement and is intended to help mitigate unnecessary speculation about monetary policy actions.
During the blackout, Governing Council members refrain from giving speeches and from speaking to the news media or other outside parties about the economic outlook and the direction of monetary policy, or about anything else that could be considered relevant to the economic outlook and their interest rate decision. Other senior representatives of the Bank are also expected to adhere to the blackout guidelines.
Quite sad to see the mighty ECB rushing to get its act together only under media and public pressure.