What would an AI-based Bank of Canada do?

CIBC is the Canadian Imperial Bank of Commerce based out of Toronto, Ontario.

Economists at the bank have asked What would an AI-based central bank do? Specifically would would an AI bank have done at its meeting just over a week ago?

The analysts answer that:

  • An AI-based Bank of Canada would have probably elected to pause

Bolding is mine.

CIBC outline the reasons for a pause. In brief::

  • a number of important ongoing disinflationary forces:
  • on a year-over-year basis, food inflation is decelerating; ditto for energy inflation
  • The Canadian dollar … At its current level, the loonie is a modest disinflationary force
  • Supply chain conditions have improved notably
  • the direction of rent inflation in the US is … going down
  • In Canada, shelter inflation, which is now rising by just under 5% (y/y), includes interest payments that are rising fast, but not principal payments that are falling. An AI-based central banker would have an issue with that.

CIBC are concerned the BoC hike is risking overshooting:

  • The US Conference Board has developed 3 indicators: lagging, coincident and leading. A quick look at the list of variables in those indicators reveals a few interesting observations: service inflation — central banks’ chief antagonist — is a proud member of the lagging indicators family, while employment is a coincident indicator. As for the seven non-financial variables that compose the index of leading indicators, all but one currently show negative contributions to future growth.

The recent hike:

This article was written by Eamonn Sheridan at www.forexlive.com. Source