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In
its first major report into the rapidly advancing world of AI,
the central banking umbrella group said policymakers need to
harness its immense power to monitor data in real time in order
to "sharpen" their inflation-predicting abilities.
That was something found badly wanting in the wake of COVID-19
and Russia's invasion of Ukraine when the U.S. Federal Reserve,
ECB and other major central banks all failed to grasp the
strength of the global inflation surge.
New AI models should reduce the risk of a repeat although their
untested nature and the fact they can "hallucinate" mean they
should not become robo-ratesetters, Cecilia Skingsley, a top
official at the BIS, said.
"We like to hold humans accountable," the former Swedish central
banker said, referring to the crucial role borrowing costs play
in society and the need for judgment.
"So I can't really see a future where an AI will be setting
(interest) rates."
The BIS, often dubbed the central bankers' central bank because
of the joint work it does, already has eight projects involving
AI.
Hyun Song Shin, its head of research and top economic adviser,
said policymakers should not view it as "something magical" but
did say it can help find needles in haystacks and spot
vulnerabilities in financial systems.
The technology is also likely to radically reshape labor
markets, impacting productivity and economic growth. Widespread
adoption could see firms adjust prices more quickly in response
to macro-economic changes with repercussions for inflation.
The BIS cautioned that AI also introduces risks, such as new
types of cyber attacks, and may amplify existing ones, such as
herding, bank runs and financial asset fire sales.
"The call for action to central banks is to foster a community
of practice," Shin said. "To share experience, to share best
practice, but also to share data and the models themselves."
(Reporting by Marc Jones; editing by Jason Neely)
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