ECB Speeches Move Markets Just as Much as Formal Policy Announcements

The European Central Bank's (ECB) communication has a significant impact on financial markets. Research by the ECB found that speeches and interviews given by policymakers between governing council meetings can move markets just as much as formal policy announcements.

The study examined euro area market reactions to both formal policy announcements following governing council meetings and inter-meeting communication events in the form of speeches and interviews.

Findings showed that around 45% of formal policy announcements produced a significant market reaction, while inter-meeting communication events had a smaller share with a more diverse impact. However, there were far more speeches and interviews than formal monetary policy announcements, and their cumulative impact added up to a sizeable market reaction.

The study found that speeches can move markets significantly by anticipating monetary policy decisions. For example, former ECB President Jean-Claude Trichet's speech at the Frankfurt European Banking Congress in November 2005 led to a sharp increase in the one-year euro overnight risk-free rate (OIS 1Y).