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The Bank for International Settlements (BIS) has called on central banks to harness the benefits of artificial intelligence (AI) while stressing that human judgment must remain crucial in setting interest rates.
In its inaugural comprehensive report on the rapidly evolving AI landscape, the central banking consortium highlighted the need for policymakers to leverage AI’s substantial capabilities to monitor real-time data, thereby enhancing their ability to forecast inflation.
Cecilia Skingsley, a senior BIS official, noted that while new AI models could potentially reduce the likelihood of past forecasting errors, their untested nature and tendency to “hallucinate” make them unsuitable for autonomous interest rate decisions. “We prefer to hold humans accountable,” said Skingsley, a former Swedish central banker, underscoring the critical societal role of borrowing costs and the necessity of human discernment. “I cannot foresee a future where an AI will be responsible for setting interest rates.”
Often referred to as the central bank for central banks, the BIS is already engaged in eight AI-related projects. The organization predicts that AI will significantly transform labor markets, influencing productivity and economic growth. Broad adoption of AI could enable companies to adjust prices more swiftly in response to macroeconomic shifts, affecting inflation dynamics.
However, the BIS also warned that AI presents new risks, such as innovative cyberattack methods, and could exacerbate existing vulnerabilities like herding behaviors, bank runs, and rapid sell-offs of financial assets.
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