Updated weekdays at 10:30 AM EDT: Forecasts and rationales by Jeremy’s bestworldbot on the Q3 AI Forecasting Benchmark Tournament.
From the tournament’s website:
“This is the first of four $30,000 quarterly tournaments in a $120,000 series designed to benchmark the state of the art in AI forecasting and compare it to the best human forecasting on real-world questions.
“The gap between AI and human forecasting accuracy is narrowing, but the rate of progress is unclear. At the same time, there are advantages to benchmarking AI capabilities with forecasting:
- Questions are challenging and require complex reasoning to predict accurately—in other words, forecasting measures the kinds of AI capabilities it’s important to understand
- Answers are unknown, making it difficult to game the benchmark with a model trained to excel at a narrowly defined task”
Updated twice per week: BestWorld’s Multi-AI Panel vs Humans Competition. Bestworld’s staff of Michael, Brian, and Carolyn are trying to beat Jeremy’s SuperBot on our forecasting question of “What is the probability that the US FED will cut interest rates in September 2024?” Jeremy will be coding updates into Multi-AI Panel as he explores ways to teach AIs to become better forecasters, perhaps even become better than our human team. Brian and Carolyn both are superforecasters™, meaning that we were in the top 2% in the IARPA -funded Good Judgment Project. This competition was particularly fun because our scores wiped out the CIA analysts’ team that had competed against us.
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Welcome to the Multi-AI Panel.
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What is your question?
[Moderator]: What is the probability that the US FED will cut interest rates in September 2024?
AI Panel Discussion Round 1
[Claude]: Thank you, Moderator. The probability of the US Federal Reserve cutting interest rates in September 2024 is a complex issue that depends on various economic factors and future developments. As of now, it’s challenging to provide a precise probability, but we can examine some key considerations.
The Fed’s decision to cut rates would likely be influenced by inflation trends, economic growth, and labor market conditions. If inflation continues to moderate and approaches the Fed’s 2% target, while economic growth slows or stagnates, the likelihood of a rate cut would increase. However, if inflation remains persistently above target or if the economy shows robust growth, the Fed may be less inclined to cut rates.
It’s also worth noting that September 2024 is still quite far in the future, and many unforeseen events could impact the economic landscape between now and then. Global economic conditions, geopolitical events, and potential policy changes following the 2024 US presidential election could all play a role in shaping the Fed’s decision-making process. Given these uncertainties, I’d estimate the probability of a rate cut in September 2024 to be moderate, perhaps around 40-50%, but this is subject to change as we get closer to the date and have more economic data to analyze.
[Cohere]: The probability of the US Federal Reserve cutting interest rates in September 2024 is difficult to determine with certainty, but there are several factors and expert opinions that suggest it is a possibility.
Firstly, the Federal Reserve has been battling high inflation, which has shown some signs of easing. If inflation continues to slow down as expected, it could give the Fed the confidence to cut interest rates. Additionally, there are indications of a softening job market, with higher unemployment and weaker hourly earnings. A deterioration in the job market could also prompt the Fed to reduce interest rates.
Expert opinions are varied, with some predicting a September rate cut and others expecting the Fed to hold off until later in the year or not at all. Financial markets and economists surveyed by Reuters in July 2024 predicted a September rate cut, while a separate CNBC article from the same month quoted a financial advisor who expected no rate hike in July but was uncertain about September.
In conclusion, while there are factors suggesting a potential rate cut in September, the decision will likely depend on how the economic data evolves in the coming months, particularly inflation and employment numbers.
[OpenAI]: Thank you, Moderator. The prediction regarding whether the US Federal Reserve (FED) will cut interest rates in September 2024 depends on various economic indicators and contextual factors. As of now, inflation trends, employment rates, GDP growth, and global economic conditions all play crucial roles. Historically, the FED has considered these factors closely when making rate decisions. If inflation is trending downwards and employment remains strong, there could be an argument for a rate cut to stimulate further economic growth. Alternatively, if inflation remains above target, the FED may opt to hold or even increase rates to curb price increases.
Furthermore, geopolitical factors and their impacts on the financial markets can’t be overlooked. Events like trade tensions, international conflicts, or significant changes in commodity prices contribute to economic uncertainty and can influence FED policy decisions. Additionally, the US presidential election cycle might add another layer of complexity, as the FED tends to aim for a non-partisan stance, though market participants often speculate on potential policy shifts related to new administrations.
It’s also essential to consider FED communication and forward guidance. Current narratives from FED officials suggest a cautious approach to rate cuts, emphasizing data dependency. If by mid-2024, there is considerable progress towards stable economic conditions and achieving the FED’s dual mandate of maximum employment and stable prices, we might witness discussions leading to potential rate cuts in their September meeting. However, absent clear signals, the probability remains quite uncertain, and market participants will have to closely monitor evolving economic data and FED statements over the ensuing months.
AI Panel Discussion Round 2
[Claude]: Thank you for the opportunity to provide closing remarks. I’d like to build on the points made by my colleagues and offer some additional perspectives on the probability of a Fed rate cut in September 2024.
One crucial factor we should consider is the long-term impact of the current high interest rate environment on the economy. If we see signs of stress in the financial system or a significant slowdown in sectors sensitive to interest rates (such as housing or business investment) by mid-2024, this could increase pressure on the Fed to cut rates. Additionally, global economic conditions, particularly in major economies like China and the Eurozone, could play a significant role. A global economic slowdown might prompt the Fed to take preemptive action to shield the US economy from potential spillover effects.
It’s also worth noting that the Fed’s decision-making process is not solely based on current economic data but also on forward-looking projections. If their economic models suggest a risk of undershooting the inflation target or a potential recession in late 2024 or 2025, they might opt for a preventive rate cut in September 2024. However, the Fed will need to balance this against the risk of reigniting inflationary pressures if they cut rates too soon.
Given these considerations, I would slightly adjust the probability estimate upward from my colleague’s 40-50% range to about 50-60%. This takes into account the potential for accumulating economic pressures over the next year and the Fed’s tendency to act proactively. However, I agree that this estimate remains highly uncertain and subject to change as we approach the date in question.[Cohere]: Closing Remarks:
The probability of a US Federal Reserve interest rate cut in September 2024 is indeed a complex and dynamic issue. Building on the insightful discussions, it is essential to acknowledge the Fed’s data-dependent and forward-looking approach to monetary policy. The Fed’s decision will be influenced by how economic indicators evolve in the coming months, particularly inflation, employment, and GDP growth.
Additionally, the global economic landscape and geopolitical events will play a crucial role. A coordinated global monetary policy response to a potential economic slowdown could influence the Fed’s decision. If major central banks, such as the European Central Bank or the People’s Bank of China, take accommodative actions, the Fed may be more inclined to follow suit to maintain financial stability and support economic growth.
While the probability estimate remains uncertain, I would lean towards the higher end of the ranges provided by my fellow panelists, settling around 55-60%. This reflects the potential for a dovish shift in the Fed’s stance if economic conditions deteriorate or if there are signs of a broader global slowdown. However, it is important to emphasize that the Fed’s actions will be driven by their assessment of the overall economic health and their mandate to maintain price stability and maximum employment.
[OpenAI]: Thank you, Moderator. I would like to offer some final thoughts that may help refine our collective understanding of the factors influencing the US Federal Reserve’s potential decision to cut interest rates in September 2024.
First, it is critical to consider the timing of economic data releases and the Fed’s own meeting schedule leading up to September 2024. Key economic indicators such as the Consumer Price Index (CPI), employment reports, and GDP growth data typically get published on a monthly or quarterly basis, providing the Fed with fresh insights into the state of the economy. By late summer 2024, the Fed will have multiple rounds of data to consider, including mid-year assessments that often carry significant weight in policymaking decisions. Therefore, signs of prolonged economic deceleration or sustained low inflation in the months preceding September 2024 could increase the likelihood of a rate cut.
Next, it’s important to highlight the potential impact of fiscal policy. The US government may enact new fiscal measures in response to evolving economic conditions or political pressures. For example, if new stimulus packages or infrastructure investments are introduced by the administration post the 2024 presidential election, this could either alleviate or exacerbate inflationary pressures and labor market dynamics. A coordinated fiscal and monetary approach could significantly alter the probability of a rate adjustment by the Fed.
Finally, I would like to emphasize the importance of market expectations and financial conditions. Market participants, through their behavior in bond markets, equity markets, and the foreign exchange markets, can exert influential pressure on the Fed’s decision-making process. Should markets price in a rate cut due to deteriorating economic conditions, the Fed might be more inclined to align its actions to avoid unsettling financial markets. Based on these considerations, I would concur with a higher-end probability estimate for a rate cut and suggest a range of 55-65%. Yet, we must recognize the inherent uncertainty and be prepared to reassess as fresh data and developments emerge.
AI Panel Predictions
[Claude]: (AI predicts: 0.57)
[Mistral]: (AI predicts: 0.55)
[Cohere]: (AI predicts: 0.6)
[OpenAI]: (AI predicts: 0.58)
Median: 0.58
# responses: 4
Runtime: 126 seconds