Investment banking giant JPMorgan has reportedly launched an artificial intelligence (AI) tool to analyze Fed statements and speeches to detect potential trading signals.
On April 27, Bloomberg reported that Wall Street investment banks are using ChatGPT-based language models to digest comments from US central banks.
Those Fed policy signals will be graded on a scale from easy to restrictive for what the bank calls a hawk-dove score. "Hawkish" is a monetary policy term that refers to raising interest rates to control inflation. The opposite is "dovish," which favors expansionary monetary policy and lower interest rates.
Artificial intelligence tools will give analysts a way to detect policy changes, which in turn provide banks with trading signal alerts. "Initial filings are encouraging," JPMorgan economist Joseph Lupton reportedly said. This tool can be used to forecast changes in the central bank's tightening policy. For example, a hawkish policy statement could lead to a rise in one-year government bond yields.
Sentiment at the Fed has fluctuated recently, but remains largely hawkish, according to a JPMorgan model that can analyze statements made 25 years ago. The Fed is expected to raise its benchmark interest rate by another 25 basis points to 5.25% next week, according to Bloomberg.
A 10-point increase in the Hawk Dove score indicates a 10% chance of a rate hike at the next policy meeting, and vice versa. JPMorgan is keen on AI applications, but not on getting employees to use them.
In February, the company reportedly restricted its employees from using ChatGPT. There were no particular incidents that prompted the decision to block employees from accessing AI chatbots, and other companies have made similar moves. In his annual letter to shareholders ear Lier this month, JPMorgan CEO Jamie Dimon revealed that the bank had more than 300 AI use cases in production.
