Mathematicians Develop AI To Forecast Market Interest Rates

Governments and businesses need AI in order to make sense of, and stay afloat in, a world inundated with data. Credit: Luca Sammarco / Pexels.com

Ateneo de Manila University

Nov. 26, 2024

Researchers from the Ateneo de Manila University have developed artificial intelligence deep learning tools that can help predict money market interest rates, invaluable for decision-makers in business and government.

They published their paper, "Deep learning approaches in interest rate forecasting," Nov. 15 in the AIP Conference Proceedings, Recent Advances In Materials And Manufacturing: ICRAMM2023

In simple terms, the market interest rate is the cost of borrowing money or the reward for saving it. This changes based on supply and demand: if many people are borrowing but few are saving, rates go up; if the opposite happens, rates go down.

Interest rates are also affected by inflation (since higher prices mean higher rates) as well as by countries' central banks (which adjust rates to help the economy grow or to control rising prices). Essentially, interest rates help determine how money moves in the economy.

"Interest rates are among the most important macroeconomic factors considered by both government and private entities when making investment and policy decisions. A reliable forecast is a requisite to sound management of exposure to different types of risk," the researchers explained.

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