Purdah—On the Rationale for Central Bank Silence around Policy Meetings


  • We would like to thank Terhi Jokipii and Björn Kraaz for excellent research assistance, Niels Bünemann for some information about the purdah practices of central banks, and Ken West, an anonymous referee, Magnus Andersson, Alan Blinder, Alex Cukierman, and Bernhard Winkler as well as seminar participants at the European Central Bank for comments. This paper presents the authors' personal opinions and does not necessarily reflect the views of the European Central Bank.


Many central banks share the practice of purdah, a guideline of abstaining from communication around policy meetings. Although seemingly contradicting the virtue of transparency by withholding information precisely when it is sought after intensely, it has been justified on grounds that such communication may create excessive market volatility. This paper assesses the purdah for the Federal Reserve and confirms that financial markets are substantially more sensitive to central bank communication around policy meetings. Short-term interest rates react three to four times more strongly in the purdah before Federal Open Market Committee meetings than otherwise, and volatility increases (compared to a reduction otherwise).