The Bank of Tanzania is exploring the use of artificial intelligence to forecast inflation and enhance monetary policy, Governor Emmanuel Tutuba said.
Tutuba was addressing the 46th annual meeting of the Association of African Central Banks (AACB) held in Mauritius where he emphasized the critical role that big data and artificial intelligence (AI) can play in monetary policy decision-making.
“Big data analytics and artificial intelligence are particularly suitable where the monetary policy framework relies on the central bank rate, due to their capability to forecast inflation effectively,” Mr Tutuba said at AACB meeting held early in September 2024.
The theme of the AGM centered on utilizing artificial intelligence and analytics technologies to tackle inflation, with discussions emphasizing their ability to accurately predict economic indicators.
During the talks on the advantages and difficulties of employing these technologies, Governor Tutuba urged central banks to adopt a cautious approach.
“We must use these technologies carefully to avoid potential harms associated with the accuracy of the relevant data,” BoT governor said.
Also at the event, the African Union’s commissioner for Trade and Industry African Monetary, Albert Mudenda Muchanga, mentioned the high inflation levels across the continent.
According to Muchanga, authorities have the supreme duty to bring down the levels of inflation across Africa, which are currently in the range of single-digit to three-digit levels across Africa, the highest being 157.9%.
For instance, the annual inflation rate in Tanzania ticked up to 3.1% in August 2024, from 3% in the previous month. Main upward pressure came from prices of miscellaneous goods & services (5.6% vs 5.9% in July), housing & utilities (5.3% vs 6.8%), according to Trading Economics.
Central banks are adopting AI and big data analytics to enhance real-time monitoring of economic indicators, improve detection of financial stability risks, and automate certain operations. Economist and investment banker, Dr. Hildebrand Shayo, pointed out that these technologies can offer regulators timely insights to aid in decision-making.
Despite the potential advantages, concerns were expressed regarding the significant costs of implementing the required systems and the complexities arising from multiple data sources.
Furthermore, risks such as data privacy threats, biases in AI systems, and cybersecurity vulnerabilities were also highlighted.
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About Association of African Central Banks
The idea of an Association of African Central Banks was first introduced on May 25, 1963, at the Summit Conference of African Heads of State and Government held in Addis Ababa, Ethiopia.
In this regard, African Heads of State and Government unanimously agreed to set up a preparatory Economic Committee to study a large range of monetary and financial issues, in collaboration with Governments and in consultation with the Economic Commission for Africa (ECA).
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