Machine learning pushes frontier of forecasting

AI techniques are starting to transform central banks’ modelling

ML forecasting

Central banks have been exploring machine learning (ML), a form of artificial intelligence (AI), since well before ChatGPT created a splash with its realistic approximation of text-based conversation late last year. ML tools were used to explore sentiment in Federal Open Market Committee transcripts, construct early-warning indicators and analyse non-standard data, including ‘big data’.

Increasingly, however, these techniques are finding their way into central banks’ core policy-making

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