The FOMC blackout, explained: why central banks go quiet before decisions

Central banks steer financial markets in two ways: by setting interest rates and by communicating. What policymakers say in speeches and interviews can shift expectations about future monetary policy, with consequences for bonds, currencies and equities. To curb those signals in the window just before a policy decision, many central banks operate a blackout period.

Under such an arrangement, officials are restricted for a defined interval from publicly discussing monetary policy or the decision that is coming up. The details differ from one central bank to another, but the objective is consistent: the official announcement should remain the principal source of information about what the committee has decided.

At the Federal Reserve, the FOMC's blackout period takes effect at midnight Eastern time on the second Saturday before a scheduled meeting and continues until 11:59 p.m. on the day after the meeting.

Comparable rules apply elsewhere. The ECB enters a quiet period seven days ahead of each monetary policy meeting. Members of the Bank of England's Monetary Policy Committee are subject to an 8-9 day communications restriction before the official rate announcement. The Bank of Canada applies its own restriction on monetary policy and economic outlook communications during the week before the rate decision.

In the run-up to a blackout, speeches by officials can offer hints about their assessments of inflation, growth and the likely direction of rates. A senior policymaker might, for example, use a speech to steer markets away from a mispricing by indicating what outcome the coming meeting is most likely to produce, thereby reducing the chance of the sharp volatility that surprises often generate.

For all that, a blackout does not stop markets from pricing in another outcome. A hotter-than-expected inflation reading or jobs report can still shift interest rate expectations substantially. One notable episode came in June 2022, when the University of Michigan survey published inside the blackout period showed inflation expectations above what had been forecast, a result that infamously led the Fed to raise rates by 75 bps.

Once the blackout is over, policymakers are free to comment publicly again. Their remarks can offer more detail on the decision and the policy outlook. The official rate announcement, the accompanying statement and the press conference remain the main points of reference. Later speeches can help explain how the committee is reacting to new economic data.