When Federal Reserve chair Jerome Powell holds a press conference, investors, economists and the media pay close attention to his words – wanting to understand the implications they hold for the future of interest rate hikes and the economy more broadly. His words carry immense weight as this past year has seen the Fed raise its benchmark interest rate in order to tame inflation, which hit a 40-year high back in June 2022. For your everyday consumer, this means higher rates for auto loans and mortgages.
Understandably, the language the Fed uses to communicate its decisions can be a difficult so decipher for those unfamiliar with the central bank – terms like “policy firming,” “softening of labor market conditions” and “below trend growth” making up some of the jargon. John Dickerson of CBS News put ChatGPT to the test, asking the AI language model to rewrite a statement from the Fed in plain language. This inspired us to do the same for other phrases Powell has uttered.
We ran some of his words through ChatGPT, and then got an expert – Francesco D’Acunto an associate finance professor at Georgetown University – to judge the results. He approved of ChatGPT’s accurate translation of the Fed’s expression to “raise the federal funds rate” with one caveat – the second sentence where ChatGPT interprets the Fed’s actions as “slowing down the economy” is debatable. True, hiking rates often results in a recession, however, D’Acunto explains that this isn’t necessary in order to reduce inflation, with Powell previously stating that a recession is not the goal here.
ChatGPT is useful in that it can simplify complex terms, yet when it comes to a more complicated subject such as central banking, it can’t fully capture nuances, leading the bot to making judgements or misunderstandings like the aforementioned. D’Acunto suggests it can provide clarity but only to a certain extent, with the need for expert explanation imperative.
The company mentioned in this article is CBS News and the person mentioned is John Dickerson. CBS News is a news division of the CBS network that operates across a variety of digital and cable platforms. John Dickerson is an American journalist who is the current anchor of CBS News’s late evening newsmagazine, CBS Evening News. Prior to this, he was the anchor on CBS’s Sunday morning news program, Face the Nation.
