(Bloomberg) -- 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.
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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.
“Increased transparency and advances in technology have potentially made asset prices more informationally efficient, which, in turn, helps with the transmission of monetary policy,” Jefferson said in remarks prepared for an event at the San Francisco Fed on Friday.
The Fed’s communication efforts will be a key focus of the central bank’s five-year review of its monetary policy framework. The review began last month and should conclude by late summer.
Jefferson said that, for now, he doesn’t think artificial intelligence is changing the way policymakers communicate. He also offered a cautionary note about the technology.
“Automatic textual analysis should not be regarded as superseding other analysis of the historical record on monetary policy,” he said. “Therefore, it is important that policymakers, researchers and investors continue to be diligent in using the right tools and the right data to make the best possible inferences.”
Jefferson did not comment on the outlook for the Fed’s benchmark policy rate in the speech.
(Adds additional context in final paragraph.)
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