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 48% likely, down from 60%’ on Aug. 6. Today’s Old Bot answer is 40%, unchanged from Aug. 6. We humans are holding steady at 80%.
[Old Bot] Rationale:
The likelihood of a Fed rate cut in September 2024 depends on multiple factors, including current inflation trends, economic growth projections, labor market conditions, and global economic uncertainties. Inflation is expected to moderate but may remain above the Fed’s 2% target, potentially delaying a rate cut. Economic growth could slow down, which might prompt an earlier cut, while the weakening job market and rising unemployment rates could also influence the decision. Historical Fed behavior and recent statements indicate a cautious approach, with uncertainty in economic projections and potential global geopolitical risks further impacting the decision. The Fed’s Chair, Jerome Powell, has indicated that a rate cut could be possible based on upcoming data, and several FOMC meetings before September 2024 allow for changes in the economic landscape that could shift the outlook.
BestWorld staffs’ latest forecast details.
Their forecasts are unchanged since Sept. 5. 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.
5-August-2024 [Carolyn] 0.93 Troubles in the AI boom paradise. Intel https://techcrunch.com/2024/08/01/intel-to-lay-off-15000-employees, Infineon, Germany’s largest chip manufacturer, to cut or relocate 2,800 jobs https://www.tagesschau.de/wirtschaft/unternehmen/infineon-stellenabbau-quartalszahlen-100.html
5-August-2024 [Brian] 0.85 Economic slowdown has triggered stock market correction. It’s not the role of the FOMC to take into account the market but it does have an influence. https://www.nytimes.com/2024/08/05/opinion/david-rosenberg-recession.html
Median 0.8
Mean 0.7871428571
Full forecast record below:
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?
AI Panel Discussion Round 1
[Claude]: Thank you, Moderator. Predicting Federal Reserve actions, especially more than a year in advance, is challenging due to the complex interplay of economic factors. However, based on current trends and historical patterns, I believe there’s a moderate probability of around 40-50% that the Fed will cut interest rates in September 2024.
Several factors support this view. First, the Fed has been aggressively raising rates to combat inflation, and by September 2024, we may see inflation sufficiently controlled to warrant easing. Additionally, economic growth might slow down by then, potentially necessitating rate cuts to stimulate the economy. The presidential election in November 2024 could also play a role, as the Fed might want to avoid any perception of influencing the election outcome.
However, there are also factors that could prevent a rate cut. If inflation remains persistently high or if the economy shows robust growth, the Fed might maintain higher rates. Additionally, geopolitical events or unforeseen economic shocks could alter the Fed’s trajectory. It’s crucial to monitor economic indicators and Fed communications in the coming months for a clearer picture.
[Cohere]: The probability of the US Federal Reserve cutting interest rates in September 2024 is high.
The Federal Reserve has been raising interest rates since early 2022 to combat inflation, which hit a 40-year peak of 9.1% in June 2022. However, with inflation cooling, the Fed is now considering cutting rates. The Fed’s preferred inflation measure is just half a percentage point above its 2% goal, and there are signs that the labor market is cooling as well.
Financial markets and economists agree that the first rate cut will likely come in September. According to CME Group’s FedWatch tool, there is a 64% to nearly 100% probability of a rate cut in September.
The size of the rate cut is less certain. Some economists predict a modest cut of 0.25%, while others suggest a larger cut of 0.5% is possible.
[OpenAI]: Considering a multitude of factors at play, the probability of the US Federal Reserve (FED) cutting interest rates in September 2024 hinges critically on evolving economic conditions. Inflation rates are a primary determinant. Suppose inflation decreases sufficiently and nears the FED’s 2% target. In that case, it could prompt the FED to consider easing monetary policy, including potential rate cuts. Additionally, economic growth metrics, such as GDP growth data, unemployment rates, and consumer spending trends, will heavily influence the decision. If these indicators suggest a slowing economy, a rate cut could be a strategic move to stimulate economic activity.
Another factor to consider is the global economic landscape. International markets significantly impact the US economy, and any global economic downturn could pressure the FED to lower interest rates as a preventative measure against potential spillover effects. Furthermore, geopolitical events and international trade dynamics often play a crucial role in shaping monetary policy decisions. For instance, prolonged trade tensions or conflicts might weaken economic outlooks, further increasing the probability of a rate cut.
Finally, historical precedents and FED’s statements can’t be ignored. The FED has shown a pattern of signaling its stance on future monetary policies well in advance. Therefore, analyzing recent communications from FED officials can offer hints about their inclinations. If recent statements indicate a dovish stance, it might raise the probability of a rate cut.
Conversely, a hawkish tone focusing on inflation control would lower this probability. Therefore, while exact predictions remain speculative, current trends in economic indicators and FED communications will provide pivotal insights as we approach September 2024.
Multi-AI Panel Discussion, Round 2
AI Panel Discussion Round 2
[Claude]: Thank you for the opportunity to provide closing remarks. I’d like to build on some points made by my fellow panelists and offer a slightly different perspective.
While I agree that predicting Fed actions over a year in advance is challenging (Editor’s note: Claude assumes that September 2024 is over a year away,) I believe the probability of a rate cut in September 2024 may be lower than some have suggested, perhaps around 30-35%. The Fed’s primary mandate is price stability, and although inflation has cooled, it remains above the 2% target. The Fed may be hesitant to cut rates too quickly, fearing a resurgence of inflationary pressures. Moreover, the labor market remains tight, which could continue to put upward pressure on wages and, consequently, inflation.
It’s also worth considering the Fed’s recent adoption of a more flexible average inflation targeting framework. This approach allows inflation to run above 2% for some time to make up for periods of below-target inflation. As such, the Fed might be inclined to keep rates higher for longer, even if inflation approaches the 2% target, to ensure long-term price stability.
Lastly, while the presidential election in November 2024 has been mentioned as a potential factor, I would argue that the Fed strives to maintain its political independence. Historical data shows that the Fed has made policy changes during election years when economic conditions warranted it. Therefore, the election itself is unlikely to be a significant driver of the Fed’s decision-making process. The Fed will likely base its decision primarily on economic data and its long-term outlook for price stability and maximum employment.
[Cohere]: I appreciate the opportunity to provide some closing thoughts and would like to emphasize a few key points.
Firstly, while the probability of a rate cut in September 2024 is difficult to pinpoint, it is important to recognize that the Fed’s actions will be data-dependent and driven by their dual mandate of price stability and maximum employment. As mentioned, the Fed may be cautious about cutting rates too soon, given that inflation is still above target and wage pressures could persist due to the tight labor market.
Secondly, the global economic landscape and geopolitical events are wildcards that could influence the Fed’s decision. A significant economic downturn or unexpected shocks could increase the likelihood of a rate cut as the Fed aims to protect the US economy from spillover effects.
Lastly, the Fed’s communication and guidance will be crucial in the coming months. While they have signaled their intention to continue raising rates, any hints of a shift in tone or stance will be carefully analyzed by markets and economists. Therefore, we should closely monitor Fed statements and economic projections to gain a clearer understanding of their likely path forward.
[OpenAI]: Thank you for the insightful views shared during this discussion. I’d like to offer some final thoughts to round off the debate.
Firstly, it’s crucial to understand that the Federal Reserve’s decisions are highly adaptive to current economic conditions. While predicting the exact likelihood of a rate cut in September 2024 remains speculative, the Fed’s future actions will undoubtedly hinge on dynamic economic indicators such as inflation rates, employment figures, and GDP growth. If inflation consistently trends downwards toward the target of 2%, and economic growth shows signs of stagnation, the probability of a rate cut would indeed rise. However, if inflation remains sticky or economic growth proves robust, maintaining or even slightly increasing rates might be more plausible.
Additionally, as Claude mentioned, the Fed’s commitment to its flexible average inflation targeting could mean they tolerate higher inflation for longer periods to offset previous shortfalls. This approach might argue against quick rate cuts even if short-term indicators seem favorable. Moreover, while it’s tempting to factor in political events like the presidential election, the Fed historically strives to remain independent of political pressures and make decisions based on economic fundamentals. For this reason, I concur with the sentiment that political events, while noteworthy, would play a minor role compared to economic data.
Lastly, I’d like to underline the importance of forward guidance and communications from the Fed. As OpenAI pointed out, the tone and hints from Fed officials offer valuable insights into potential policy shifts. Observing these signals will be critical to understanding their evolving stance. Therefore, as we approach September 2024, closely monitoring the unfolding economic landscape and Fed communications will provide the best clues about their actions. In conclusion, while the current probability metrics might hover around 40-50%, real-time data and ongoing Fed discourse will significantly refine this estimate.
AI Panel Predictions
[Claude]: (AI predicts: 0.45)
[Mistral]: (AI predicts: 0.45)
[Cohere]: (AI predicts: 0.5)
[OpenAI]: (AI predicts: 0.5)
Median: 0.48
