Fed Vice Chair Jefferson: AI Accelerates Investor Reactions to Central Bank Communications

Fed's Jefferson says AI is speeding investors' reactions to central bankers' messages

(Reuters) - Artificial intelligence is speeding the rate at which investors react to specific sentences in central bankers' speeches and in statements describing their policy actions, Federal Reserve Vice Chair Philip Jefferson said on Friday, but it's unclear whether that increased speed is boosting or hindering the effective transmission of monetary policy. "For now, I do not think artificial intelligence is changing the way policymakers communicate, but research shows that it has affected how quickly information about policy is incorporated into asset prices," Jefferson said in prepared remarks to a conference at the San Francisco Fed that did not touch on his outlook for monetary policy or the U.S. economy. Further research is needed, he said, to determine whether the faster speed is allowing monetary policy to get transmitted faster through the economy, or, as some worry, that it "may provide an incentive for investors to value speed over accuracy, and may reduce the long-run informativeness of asset prices, which could hurt the transmission of monetary policy." In any event, Jefferson said, research makes it clear that it's not just investors but also households that pay attention and respond to monetary policy pronouncements. Policymakers, he said, "should communicate as clearly as possible to avoid increasing uncertainty."

Fed's Jefferson says AI is speeding investors' reactions to central bankers' messages

Feb 21 (Reuters) - Artificial intelligence is speeding the rate at which investors react to specific sentences in central bankers' speeches and in statements describing their policy actions, Federal Reserve Vice Chair Philip Jefferson said on Friday, but it's unclear whether that increased speed is boosting or hindering the effective transmission of monetary policy. "For now, I do not think artificial intelligence is changing the way policymakers communicate, but research shows that it has affected how quickly information about policy is incorporated into asset prices," Jefferson said in prepared remarks to a conference at the San Francisco Fed that did not touch on his outlook for monetary policy or the U.S. economy. Further research is needed, he said, to determine whether the faster speed is allowing monetary policy to get transmitted faster through the economy, or, as some worry, that it "may provide an incentive for investors to value speed over accuracy, and may reduce the long-run informativeness of asset prices, which could hurt the transmission of monetary policy." In any event, Jefferson said, research makes it clear that it's not just investors but also households that pay attention and respond to monetary policy pronouncements. Policymakers, he said, "should communicate as clearly as possible to avoid increasing uncertainty." Reporting by Ann Saphir; Editing by Paul Simao Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Fed's Jefferson Says AI Speeds Impact of Policy on Asset Prices

Federal Reserve Vice Chair Philip Jefferson said artificial intelligence tools may help with the transmission of monetary policy, but cautioned about the limits of the technology. Jefferson said research suggests the automated analysis of the Fed's communication, along with automated trading, had increased how quickly information is incorporated into asset prices.