The Reserve Bank of New Zealand’s has confirmed its surprise decision to cut an official interest rate last month was leaked by a journalist to colleagues and to an economics blogger.
While it appears there was no market impact, the bank’s governor says the leak “created the opportunity for improper gain on financial markets” and had the potential to “damage to the integrity of the Bank’s communications”.
The bank will now end its practice of providing “lock-ups” for media ahead of official announcements.
The RBNZ stunned financial markets on March 10 by cutting its overnight cash rate by 0.25% to 2.25%. It brought the interest rate to its lowest level on record and the decision was predicted by only 4 of 21 economists polled by Thomson Reuters.
Advance knowledge of the decision, even over a very short time period, would give traders the ability to take hugely profitable positions in the market.
The RBNZ’s lock-ups are an uncommon practice for central banks ahead of the release of market-sensitive decisions. It appears that last month, a journalist from Newshub Mediaworks in the lock-up alerted colleagues to the surprise rate cut. A Mediaworks staff member also alerted an economics blogger.
Deloitte’s forensic unit investigated the leak with the co-operation of legal representatives at Mediaworks, who reviewed internal communications.
Governor Graeme Wheeler said: “The leak is a serious and disappointing breach of many years of trust. It created the opportunity for improper gain on financial markets and damage to the integrity of the Bank’s communications. I am extremely disappointed that the information was leaked initially and then communicated more widely.
“The fact that several people outside the Bank, who had access to the information improperly, failed to alert the Bank immediately, was irresponsible and left open a significant risk that the Bank could have closed down quickly with an immediate official release.”