CIBC is the Canadian Imperial Bank of Commerce based out of Toronto, Ontario.
Economists at the bank have asked What would an AI-based central bank do? Specifically would would an AI bank have done at its meeting just over a week ago?
The analysts answer that:
- An AI-based Bank of Canada would have probably elected to pause
Bolding is mine.
CIBC outline the reasons for a pause. In brief::
- a number of important ongoing disinflationary forces:
- on a year-over-year basis, food inflation is decelerating; ditto for energy inflation
- The Canadian dollar ... At its current level, the loonie is a modest disinflationary force
- Supply chain conditions have improved notably
- the direction of rent inflation in the US is ... going down
- In Canada, shelter inflation, which is now rising by just under 5% (y/y), includes interest payments that are rising fast, but not principal payments that are falling. An AI-based central banker would have an issue with that.
CIBC are concerned the BoC hike is risking overshooting:
- The US Conference Board has developed 3 indicators: lagging, coincident and leading. A quick look at the list of variables in those indicators reveals a few interesting observations: service inflation — central banks’ chief antagonist — is a proud member of the lagging indicators family, while employment is a coincident indicator. As for the seven non-financial variables that compose the index of leading indicators, all but one currently show negative contributions to future growth.
The recent hike:
