JPMorgan uses AI to predict market behavior

JPMorgan Investment Bank has introduced its own artificial intelligence (AI) tool for analyzing statements and speeches of the US Federal Reserve System in order to identify potential signals for the market.

Representatives of the bank explained that the work uses a ChatGPT-based language model: with its help, analysts process comments from the US central bank, which will be evaluated on a scale from light to restrictive.

The «hawkish» signal refers to an interest rate increase to control inflation. The opposite is a «dovish» signal, which signals a softer monetary policy and a rate cut.

The bank's experts are confident that the AI tool will make it possible to detect changes in monetary policy and give trading signals to the market. Moreover, this tool can be used to predict changes in the tightening of the central bank's policy, which may lead to an increase in the yield of 1-year government bonds.

The JPMorgan model is able to analyze reports for 25 years, and it calculated that the Fed's sentiment has been predominantly «hawkish» lately.