Anthony Savagar, Misa Tanaka and Jagdish Tripathy

With increased availability of big data and computing power, more firms are adopting algorithmic and AI-powered pricing to adjust prices rapidly in response to changing economic conditions over time and across consumers. This post reviews the existing research, draws implications for central banks, and identifies areas for further research on this topic. The research reviewed here was also used to inform Lombardelli and Patel (2026). The existing research suggests that new pricing technologies will lead to faster pass-through of shocks to prices, greater market segmentation, and may improve the inflation-output trade-off for monetary policy makers. To ensure price stability, central banks will need to monitor granular, high-frequency price data to gauge the impact of shocks on prices and inflation expectations.

John Lewis and Belinda Tracey

Today marks the fifth anniversary of Bank Underground! On 19 June 2015 we launched with our maiden pair of posts on how driverless cars might shake up the insurance industry and optimal monetary policy in the presence of an effective lower bound.

Given our need to reprioritise staff resources towards responding to the Covid-19 pandemic, we’ll be temporarily pausing publishing posts on Bank Underground. We will review this periodically and hope to resume soon.

Belinda Tracey, Managing Editor

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Comments will only appear once approved by a moderator, and are only published where a full name is supplied. Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England, or its policy committees.