ECB urges investors to ignore media leaks

There have been more than 360 leaks of sensitive information to the press within eurozone central banks over a 20-year period, the European Central Bank said on Friday, as it called on markets to ignore reports based on them.

After trawling through stories by financial news wires Bloomberg, Reuters and MNI, the ECB’s research found 368 stories based on leaks from central bank insiders between 2002 and 2021. , they were unreliable indicators of future decisions and should be treated with caution.

“Looking back after decisions were made, past leaks usually did not move market rates closer to the actual policy outcome,” the officials said. “Our findings suggest that in most cases market participants would be well advised to ignore such unauthorized communications.”

ECB President Christine Lagarde has tried to reduce leaks since taking over from Mario Draghi in November 2019, urging fellow rate-setters to stop voicing dissent over policy decisions during or immediately after meetings .

The number of articles based on leaks from ECB insiders has declined, falling from a peak of 36 in 2019 to 22 in 2021, according to research by officials from the ECB, the Austrian Central Bank and the Bank for International Settlements. ,

Officials found there had been a “substantial increase” in leaks following recent policy meetings of the ECB’s main rate-setting Governing Council, which often undermined the message delivered in official announcements.

Many of those meetings have resulted in controversial decisions. Draghi clashed with the more hawkish members of the governing council, including the heads of the Dutch, German and Austrian central banks, who act as rate-setters.

“Leaks are more frequent when policy debates are more contentious — when there may be significant disagreement between policymakers,” the officials said.

The most controversial decision in recent years was the last time it cut rates and restarted bond purchases at one of the pre-last meetings in September 2019. In accepting the decision, he was surrounded by drag.

Lagarde has adopted a different leadership style to Draghi, choosing to rally rate-setters around a decision and then clarify it, rather than leading from the front and expecting others to follow.

Despite stories based on leaks that often reflect minority views and “generally” do not provide reliable information about upcoming policy decisions, they move markets.

Looking at movements every 35 minutes in the overnight indexed swaps market, in which investors bet on interest rate changes, the researchers found that leaks caused prices to move 60-95 percent higher than normal. He also said the leak moved markets 15-30 percent more than the average public statements by ECB Governing Council members.

The leak “often reverses earlier market trends in short-term rates”, going against public expectations for policy decisions. Public statements by rate-setters often “reduce the effect of leaks” by reversing some of their market effect.

Officials said the leaks “do not have a substantial impact on policy decisions and generally do not reduce policy flexibility”. He added that “multiple leaks just add noise to the debate and volatility in the markets”.