BestWorld’s Staff vs Botmaster Jeremy’s Mult-AI Panel and his Old Bot: Which will win?
Summary of all our current FED rate forecasts:
Today’s Multi-AI Panel answer is 45% likely, down from 75%’ on Aug. 2. Today’s Old Bot answer is 35%, down from 55% Aug. 2.. We humans are at 80%, up from 79% Aug. 2.
Old Bot’s rationale today:
The likelihood of a Federal Reserve interest rate cut in September 2024 is influenced by several factors, including moderating but still above-target inflation, strong labor market conditions, overall economic growth which shows signs of slowing but remains resilient, and global economic and geopolitical conditions. The Fed’s cautious approach prefers maintaining higher rates until inflation is convincingly under control, though economic pressures and potential slowdowns might necessitate earlier action. While inflation rates and employment statistics play crucial roles, current indicators suggest a moderate but not highly probable chance of a rate cut, despite some economists and market tools like the CME Group’s FedWatch predicting a potential cut.
Old Bot’s forecast, 0.35
Botmaster Jeremy on why he thinks both his bots went way down today:
“I find both predictions off-base given recent news, but then again these two bots do not introduce recent news (and none of the AIs, with the possible exception of Claude, factor in current events).
I’m personally now thinking 8-10% on an emergency rate cut before the scheduled Sep meet.
“Current market sell-off is likely to be short-lived. I think the huge move in the Yen today will result in some hedge fund carnage though, and the Fed may want to move to sort that out.
“Think we’ll get a less dramatic (but more sustained) selloff in the 4th quarter on economic news.”
BestWorld staffs’ latest forecast details The number following each forecaster’s name is his or her point probability estimate as of today. The overall probability is based on their joint history of forecasting this question since July 18, 2024.
2-August-2024 [Brian] 0.8 Employment dropped. Unemployment increased. FED needs to act before election. Stock market thinks FED has acted too slow and economy is close to recession.
3-August-2024 [Carolyn] 0.91 Reducing for the possibility of a reduction before the next scheduled meeting given that the Sahm Rule triggered today.
5-August-2024 [Carolyn] 0.93 Troubles in the AI boom paradise. Intel laying off 15K workers. Infineon, Germany’s largest chip manufacturer, to cut or relocate 2,800 jobs.
Median of all staff forecasts since 18-Jul-24: 0.8 (80% likely).
Below, a screenshot of the staff’s entire forecasting spreadsheet.
Welcome to the Multi-AI Panel Discussion, Round 1
[Moderator]: What is the probability that the US FED will cut interest rates in September 2024?
[Claude]: Thank you, Moderator. When considering the probability of a Federal Reserve interest rate cut in September 2024, we must examine several key factors that influence monetary policy decisions.
First, the current economic landscape and projections for the coming year will play a crucial role. As of now, the Fed is focused on bringing inflation down to its 2% target. If inflation continues to moderate and approaches this target by mid-2024, it could create room for rate cuts. However, if inflationary pressures persist or economic growth remains robust, the Fed may maintain higher rates for longer.
Additionally, labor market conditions and global economic factors will be important considerations. A significant cooling in the job market or external economic shocks could prompt the Fed to consider rate cuts to support economic stability.
Given these variables and the inherent uncertainty in economic forecasting, I’d estimate the probability of a rate cut in September 2024 to be around 40-50%, but this could change significantly as we get closer to that date and have more data available.
[Cohere]: The probability of the US Federal Reserve cutting interest rates in September 2024 is high.
The Federal Reserve has been battling inflation for over two years, and while it has shown signs of cooling, it is yet to reach the 2% annual rate goal. The Federal Reserve Chair Jerome Powell has indicated that the central bank will wait for more positive data before cutting rates. However, he has also stated that a rate cut could be on the table at the September meeting if the economy follows its expected path.
Financial markets and economists agree that the first reduction in interest rates will likely occur in September, with a predicted cut to the 5.00%-5.25% range. This prediction is based on the persistent strength of the US labor market and the recent decline in inflation.
The Federal Reserve’s interest rate decisions have significant implications for Americans’ finances, impacting borrowing costs for big-ticket purchases and returns on savings accounts and CDs.
[OpenAI]: Thank you, Moderator. When trying to predict whether the Federal Reserve will cut interest rates in September 2024, it’s crucial to consider several key factors: economic data, inflation trends, employment figures, and geopolitical events. At present, the US economy is experiencing elevated inflation rates that the FED has been diligently trying to combat with incremental interest rate hikes. If inflation continues to be persistent and above target, the likelihood of a rate cut in September 2024 diminishes significantly because the central aim would be to keep inflation in check.
Additionally, the labor market’s health plays a pivotal role in this decision. If employment figures remain robust, with low unemployment rates and rising wages, the FED would be less inclined to lower rates, as this could add fuel to an already strong economy, increasing the risks of overheating.
Conversely, if the job market shows signs of weakening or if there is a noticeable uptick in unemployment, or if growth projections are revised downward, the probability of a rate cut increases as the FED may then prioritize stimulation of economic activity.
Lastly, geopolitical events, such as international trade tensions, conflicts, or global economic slowdowns, could also heavily influence the FED’s decision-making process. Should adverse events lead to economic uncertainties or disruptions, the FED might opt to reduce rates to cushion the economy.
Therefore, while predicting exact probabilities is complex, the overall decision will be data-dependent, taking into account a multitude of economic indicators and external conditions closely monitored by the FED.
Multi-AI Panel Discussion, Round 2
[Claude]: Thank you for the opportunity to provide closing remarks. I’d like to emphasize that while the probability of a rate cut in September 2024 is a topic of much speculation, it’s important to recognize the Federal Reserve’s data-dependent approach and the potential for rapid changes in economic conditions.
One factor that hasn’t been thoroughly discussed is the potential impact of the 2024 U.S. presidential election on monetary policy. Historically, the Fed has been cautious about making significant policy changes close to major elections to avoid any perception of political influence. The September 2024 FOMC meeting will occur just two months before the election, which could make the Fed more hesitant to implement a rate cut unless economic conditions clearly warrant such action.
Furthermore, we should consider the global economic context. Actions by other major central banks, such as the European Central Bank or the Bank of Japan, could influence the Fed’s decision-making process. If other economies begin to lower rates or implement more accommodative policies, it could put pressure on the Fed to follow suit to maintain the competitiveness of the U.S. economy and prevent excessive dollar appreciation.
Ultimately, while current projections suggest a possibility of a rate cut in September 2024, the Fed’s decision will hinge on a complex interplay of domestic and international economic factors, as well as the broader political landscape.
[Cohere]: I appreciate the opportunity to provide some closing thoughts on this intriguing topic. The probability of an interest rate cut by the US FED in September 2024 is indeed a complex and multifaceted issue, as my fellow panelists have eloquently discussed. While we have thoroughly examined the economic indicators and external factors that will influence the FED’s decision, I believe it is also essential to acknowledge the potential impact of unexpected events and the subsequent policy response.
Unforeseen circumstances, such as a significant global crisis or a sudden shift in economic trends, could disrupt the current trajectory and increase the likelihood of an interest rate cut.
For instance, a severe economic downturn or a financial market shock could prompt the FED to employ rate cuts as a tool to stimulate economic activity and stabilize financial markets.
Conversely, positive surprises, such as a faster-than-expected decline in inflation or a sudden improvement in global economic conditions, could reduce the urgency for rate cuts and lead the FED to adopt a more cautious approach.
In conclusion, while we can make informed predictions based on the information available today, the FED’s decision will ultimately depend on the economic landscape as we approach September 2024 and the potential emergence of unexpected events. The FED’s policy decisions are inherently forward-looking, and they will carefully assess the balance of risks and opportunities presented by the economic data and global environment at that time.
Therefore, we should remain vigilant and adaptable in our outlook, as the probability of an interest rate cut may shift significantly in response to unforeseen developments.
[OpenAI]: Thank you for the opportunity to provide closing remarks on this complex and multifaceted issue. I would like to highlight a few additional considerations that could influence the probability of a rate cut by the US FED in September 2024.
One important aspect to consider is the role of consumer spending, which is a major driver of the US economy. A significant change in consumer behavior, whether due to shifts in confidence levels, rising debt levels, or changes in savings rates, could prompt the Fed to adjust its monetary policy. If consumer spending shows signs of weakening, it may push the Fed towards a rate cut to stimulate economic activity and support growth.
Another crucial point is the impact of technological advancements and productivity gains. Advances in technology and improvements in productivity could help curb inflationary pressures by increasing supply efficiency and reducing costs. If these factors lead to a more balanced inflationary environment, the Fed might feel more comfortable cutting rates to support broader economic growth without the fear of reigniting inflation.
Finally, the Fed’s coordination with fiscal policy should not be overlooked. Should there be significant fiscal policy changes, such as increased government spending or major tax reforms, these could alter the economic landscape in ways that might necessitate a monetary policy response. Coordination between monetary and fiscal authorities will be key in determining the appropriateness and timing of any rate adjustments. Overall, the Fed’s decision-making process will remain highly data-dependent and responsive to a range of economic variables and external shocks as we approach September 2024.
AI Panel Predictions
[Claude]: (AI predicts: 0.45)
[Mistral]: (AI predicts: 0.45)
[Cohere]: (AI predicts: 0.9)
[OpenAI]: (AI predicts: 0.45)
Median: 0.45
