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Hall - Monsters in the deep?

Significant recent advances in the capabilities of artificial intelligence (AI) raise the question of whether increasing use of AI models could have a negative impact on financial stability. In this speech, Jonathan will explore two ways in which firms using AI models could create potential risks to financial stability.

In this speech delivered by Jonathan Hall, an external member of the Financial Policy Committee at the Bank of England, he discusses the potential impact of advances in artificial intelligence (AI) on financial stability. He highlights the risks and potential mitigants associated with AI, emphasizing the need for collaboration between regulators, market participants, and AI safety experts to minimize harmful behavior. Hall explores the concept of deep learning and its potential applications in financial markets, discussing the potential for deep trading agents to become a reality. He raises concerns about model failure, model misspecification, and the potential for collusive or destabilizing behavior in AI trading algorithms. Hall suggests that the widespread adoption of AI trading algorithms could lead to a less resilient and highly correlated market ecosystem. He concludes by emphasizing the importance of balancing efficiency and profit with market stability and resilience.


Positivity: 70
Uncertainty: 80

Australia RBA Cash Rate Target 4.35% (consensus 4.35%) in May-24

• The RBA held the cash rate at 4.35% amid ongoing but moderating inflation, particularly in the services sector, reflecting a cautious approach to ensure inflation returns to the 2-3% target range by the second half of 2025.
• Economic uncertainties, including persistent services inflation, global geopolitical risks, and the effects of previous rate hikes on consumption and economic growth, continue to influence the RBA’s policy decisions.
• The RBA maintains a flexible policy outlook, indicating that future rate adjustments will be data-driven and contingent upon evolving economic conditions and inflation trajectories, with a strong commitment to achieving its inflation target.

UK Politics: The Third Way Renewed?

• The outcome of the so-called ‘battle for Labour’s soul’ will ultimately be determined principally by Sir Keir Starmer’s understated but undoubted ambition coupled with the Third Way principle that ‘what matters is what works’.

By Alastair Newton

Philippines CPI Inflation 3.8% y-o-y (consensus 4.1%) in Apr-24

- Philippines CPI inflation in April 2024 registered at 3.8% y-o-y, below the consensus forecast of 4.1% and showing a moderation compared to the previous period.
- The current CPI inflation rate represents the highest growth rate since December 2023 and is 0.72 percentage points below the one-year average, indicating relatively lower price growth in the economy. Additionally, it is 1.75 percentage points below the long-run average, signaling a significant deviation from the historical trend.