How AI-driven technology can boost accuracy in inflation forecasting

The integration of AI in economic forecasting, specifically inflation prediction, is a burgeoning field that leverages advancements in ML and natural language processing

“Central banks must feel like they have stepped through a mirror, and who can blame them? They used to struggle to bring inflation down or keep it under control; now they toil to push it up. They used to fear wage increases; now they urge them on. They used to dread fiscal expansion; now they sometimes invoke it.” 

–  Claudio Borio, 2017, former head, Monetary and Economic Department, Bank for International Settlements

 

Fast forward to 2022, when this cycle was reversed, and it was completely unanticipated, with the world engulfed with a vicious inflation cycle. However, such developments clearly reflected