RBNZ Says Journalist Leaked Surprise Rate-Cut Move in March

  • `A serious and disappointing' breach of trust, Wheeler says
  • RBNZ to discontinue embargoed lockups for media, analysts

New Zealand’s central bank said a journalist leaked its decision to cut interest rates last month before the official release time, although there is no evidence the information had any impact on financial markets.

A Newshub MediaWorks reporter sent information about the surprise cut to the official cash rate from a media lockup on March 10 before an embargo was lifted, the Reserve Bank of New Zealand said in a statement Thursday, citing the results of an independent investigation by Deloitte. This information was then passed on by another person in Newshub to an economics blogger, it said.

“The leak is a serious and disappointing breach of many years of trust,” Governor Graeme Wheeler said in the statement. “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 RBNZ initiated a probe after Michael Reddell, a former RBNZ official and now outspoken critic of the central bank, wrote in a blog post that he’d been told of the decision before the embargo lifted. The RBNZ on March 10 cut its benchmark rate to a fresh record low of 2.25 percent, wrong-footing most economists and investors and prompting the New Zealand dollar to drop more than 1 U.S. cent.

The central bank holds lockups for journalists and analysts on the day of a rate decision so they can digest the news under an embargo, which lifts at 9 a.m. local time. Reddell said he’d “had an e-mail out of the blue” at around 8 a.m. on March 10 that disclosed the unexpected rate cut. He informed the bank after 9 a.m., he said.

The RBNZ engaged Deloitte’s forensic unit, which interviewed members of the media that had attended the lockup, including Bloomberg News reporters. Other media organizations that routinely attend the lockups include Reuters and Dow Jones.

“Deloitte was assisted in its investigation by MediaWorks’ legal team, who undertook an internal investigation, uncovered e-mails that confirmed the leak, and reported these to Deloitte,” the RBNZ said.

Market Volatility

The bank will discontinue lockups for rate decisions, monetary policy statements and financial stability reports with immediate effect.

That could increase market volatility when six-weekly rate decisions are accompanied by a quarterly monetary policy statement, which includes new forecasts and analysis, said Imre Speizer, markets strategist at Westpac Banking Corp in Auckland.

“It’s going to take a longer time to read it and interpret it, so markets will have a longer span of time to react,” he said.

Prime Minister John Key said that ending lockups may not be the best option, as they allow media to report with a better clarity, according to comments reported from Christchurch by Fairfax Media.

One breach of an embargo doesn’t mean everything needs to change and “sometimes it’s just better, I think, to see if you can find another pathway through,” Key was quoted as saying.

Finance Minister Bill English declined to comment. The Financial Markets Authority, New Zealand’s financial regulator, said it wasn’t planning any action “at this point” and it wasn’t aware of any untoward share-market trading.

New Technology

RBNZ Head of Communications Mike Hannah said the bank was aware that new technology presented risks in lockups, and the leak was the final straw.

“We weighed up the risks against the original benefits of the lockups, which was minimizing misinterpretations, that sort of thing,” he said. “Just the way technology has gone, we thought we just cannot satisfy ourselves that we can cover the risks now.”

The subplot is the tension between the RBNZ and former staffer Reddell, who left the bank last year and regularly criticizes Wheeler in his Croaking Cassandra blog.

Wheeler said Thursday that the people who received the leaked information and failed to inform the bank straight away were “irresponsible and left open a significant risk that the bank could have closed down quickly with an immediate official release.”


“There’s no sign he’s taking any responsibility for the fact that the bank had systems that are so weak that somebody could just e-mail from their laptop” during a lockup, Reddell said in an interview Thursday. He should “take some responsibility for that.”

Mark Weldon, chief executive officer of MediaWorks, said the Auckland-based television, radio and media company had apologized unreservedly for the incident, according to a statement on its Newshub website.

“Once MediaWorks was aware a leak had taken place, it conducted its own investigation to determine whether the leak had come from within MediaWorks and self-reported that to the Reserve Bank," Weldon said.

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