Artificial Intelligence Accelerates Investor Responses to Central Bank Communication
Artificial intelligence (AI) is hastening investor reactions to specific remarks in central bank speeches and policy statements, according to Federal Reserve Vice Chair Philip Jefferson. However, the impact of this accelerated response on the efficacy of monetary policy transmission remains uncertain.
"While AI has not significantly altered how policymakers communicate, it has influenced the speed at which policy information is incorporated into asset prices," Jefferson observed in a presentation at the San Francisco Fed.
Further research is necessary to determine if this accelerated pace enhances or hinders monetary policy transmission. Some concerns suggest that it could incentivize investors to prioritize speed over accuracy, diminishing the long-term informational value of asset prices and potentially impairing monetary policy transmission.
Regardless, Jefferson emphasized that research highlights the attentiveness of both investors and households to monetary policy announcements. To mitigate uncertainty, he advised policymakers to communicate with the utmost clarity.