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AI Tool Created by JPMorgan Analyzes Fed Speech to Give Trading Signals


According to reports, the world’s largest investment bank JPMorgan has launched an artificial intelligence (AI) tool to examine speeches and statements by the Federal Reserve for potential trade signals.

According to a report by Bloomberg on April 27, Wall Street investment banks are analyzing central bank statements using a language model based on ChatGPT. To determine what the bank calls a Hawk-Dove Score, these Fed policy signals will be ranked on a scale from easy to restrictive.

In terms of monetary policy, “hawkish” refers to increasing interest rates to keep inflation under control. The β€œDovish” alternative, which favors expansionary monetary policy and lower interest rates, is the opposite.

Analysts will be able to identify policy changes using AI tools, which can provide banks with information about trading signals. According to the report, JPMorgan economist Joseph Lupton said that “early applications have been very encouraging.”

It is possible to estimate changes in central bank tightening using this tool. For example, a hawkish policy statement can cause one-year government bond yields to increase.

The JPMorgan model, which can examine statements dating back 25 years, predicts that while Fed sentiment has fluctuated recently, it is still primarily hawkish. According to Bloomberg, the Federal Reserve is expected to raise its benchmark interest rate by an additional 25 basis points to 5.25% the following week.

A 10 point increase in the Hawk-Dove Score predicts a 10% chance of a rate hike at the next policy meeting, and the reverse is also true. JPMorgan is interested in AI applications for its own use, but is less interested in allowing its staff to use them.

According to reports, the company banned the use of ChatGPT by its employees in February. The decision to limit employee access to AI chatbots was not motivated by any particular incident, and other businesses have taken similar actions.

The bank has more than 300 AI use cases in production, according to Jamie Dimon, CEO of JPMorgan Chase, in a letter to shareholders earlier this month.


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