New Zealand halts embargoed monetary policy communication lock-ups

The Reserve Bank of New Zealand has officially called an end to its practice of announcing monetary policy decisions via embargoed lock-ups.

The decision to stop providing media with pre-announcement access to this market sensitive information under embargo in the lock-up arrangement follows the credibility-damaging leak of the RBNZ's rate cut decision earlier this year.

Announcing monetary policy decisions via embargoed lock-ups inevitably involves risks

As demonstrated by a recent technical glitch in the Fed's lock-up room, central banks' embargoed lock-ups are inevitably prone to error, and the only prudent strategy is to keep the oversight of the embargo procedures ultra tight.

From this month, the RBNZ introduced new procedures for monetary policy releases, calling for the policy decision to be announced simultaneously via its pages on Bloomberg and Thomson Reuters terminals, the Bank’s website, Twitter, and email to news media and general public subscribers. The RBNZ commissioned a communications security review by Deloitte, which suggested the Bank discontinue the lock-up arrangements unless it is prepared to take some risk and invest heavily into a secure controlled computer environment.

Governor Graeme Wheeler, in an RBNZ press release:

"The review found that in the rapidly changing technology environment there is no completely failsafe option, and that over time the extent of risk mitigation through controls will be eroded by advances in technology.

"We gave serious consideration to the value of the lock-ups, and the potential issues that could arise if we permanently discontinued them. We also consulted with many other central banks. New Zealand was one of only a few central banks that held pre-release lock-ups of OCR decisions for news media."

True, as I have argued on this website earlier, it takes effort and costs money to keep lock-up embargo rules ultra tight and review them regularly along with advances in technology. The RNBZ's communications security analysis serves once again to reinforce this point.