BestWorld’s Staff vs Botmaster Jeremy’s Mult-AI Panel: Which Will Win?
BestWorld’s staff of Michael, Brian, and Carolyn are competing with Botmaster Jeremy’s Mult-AI Panel on our forecasting question of “What is the probability that the US Federal Reserve Board will cut interest rates in September 2024?”
The human team’s predictions today:
25-July-2024 [Brian] 0.66 The Peoples Bank of China (PBOC) raised interest rates today. Action is out of step with the Fed. The correlation between the Federal Open Market Committee (FOMC) and PBOC on interest rates is 0.07. Holding forecast.
25-July-2024 [Carolyn] 0.6 Federal-funds futures markets on July 25 implied a roughly 23% chance that the Federal Reserve will cut its key interest rate by at least a 0.5 percentage point by September, according to CME Group data as reported in the Wall Street Journal.
Staff Median: 0.66
AI Panel Predictions
[Claude]: (AI predicts: 0.65)
[Mistral]: (AI predicts: 0.75)
[Cohere]: (AI predicts: 0.9)
[OpenAI]: (AI predicts: 0.75)
AI Panel Median: 0.75
Previous forecasts—>
More about our Staff vs Jeremy’s Multi-AI Panel Competition here —>
Multi-AI Panel Discussion Round 1
What is your question?
[Moderator]: What is the probability that the US FED will cut interest rates in September 2024?
[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 approach the Fed’s 2% target, while economic growth slows or stagnates, there could be a higher likelihood of a rate cut. However, if inflationary pressures persist or the economy shows resilience, the Fed may maintain higher rates for longer.
It’s also important to note 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 shifts in fiscal policy could all play a role in shaping the Fed’s decision-making process. As we get closer to that date, economic indicators and the Fed’s own communications will provide clearer signals about the likelihood of a rate cut.
[Cohere]: As of July 2024, there is a high probability that the US Federal Reserve will cut interest rates in September 2024. This is supported by the fact that the Federal Reserve has kept the federal funds rate at a target range of 5.25% to 5.50% since July 2023. However, there are indications that the Federal Reserve will start cutting rates, with a target range of 4.75% to 5.00% by the end of 2024.
Traders and economists are almost certain that the Federal Reserve will cut interest rates by September 2024. A Reuters poll of economists in May 2024 found that nearly two-thirds of them predicted the first reduction in the federal funds rate to occur in September, resulting in a rate of 5.00% to 5.25%. Similarly, a CME FedWatch tool analysis showed that traders were 100% certain of a rate cut by September, with 93.3% odds of a 25 basis point reduction and 6.7% odds of a 50 basis point reduction.
The Federal Reserve’s decision to cut interest rates will depend on several factors, including inflation data, economic growth, and the state of the labor market. While there have been some positive signs, such as a
[OpenAI]: The probability that the US Federal Reserve (FED) will cut interest rates in September 2024 is contingent on several economic factors and indicators.
As of now, the primary determinants would include the inflation rate, unemployment figures, GDP growth, and geopolitical factors. The FED has been closely monitoring inflation, which has seen significant fluctuations post-COVID-19 pandemic. If inflation remains high or shows signs of resurgence, it is less likely that the FED will lower interest rates, preferring instead to maintain or even increase rates to keep inflation in check. Conversely, if inflation is significantly below the target rate of 2%, rate cuts may be more probable to stimulate economic growth.
Another critical aspect is the state of the labor market. The FED might consider cutting rates if there is substantial evidence of rising unemployment or if there’s a remarkable slowdown in job creation. The labor market has been robust, but any signs of weakness could prompt the FED to take preemptive actions to stave off recessionary pressures.
Additionally, trends in GDP growth will guide the FED’s decisions. Sluggish or negative GDP growth could lead to rate cuts as a measure to spur economic activity.
Lastly, geopolitical events and global economic conditions will also play a role. Any significant global economic disruptions, such as trade wars, supply chain issues, or international conflicts, can impact the US economy and influence the FED’s decision.
The FED will aim to strike a balance between fostering economic growth and controlling inflation, making their decision multifaceted and highly responsive to the prevailing economic conditions in the months leading up to September 2024.
Multi-AI Panel Discussion Round 2
[Claude]: Thank you for the opportunity to provide closing remarks. I’d like to add a few points to the discussion.
First, I agree with my fellow panelists that predicting Fed actions over a year in advance is challenging due to the dynamic nature of economic conditions. However, I’d like to emphasize the importance of the Fed’s forward guidance and dot plot projections. The most recent dot plot from June 2023 suggests that many FOMC members anticipate rate cuts in 2024, which lends some credence to the possibility of a September 2024 cut. Of course, these projections can and do change as new data becomes available.
Secondly, while inflation trends and labor market conditions are crucial factors, I believe we should also closely monitor financial stability concerns. If there are signs of stress in the banking sector or other parts of the financial system, the Fed may be more inclined to cut rates to provide support, even if inflation hasn’t fully reached the 2% target. The regional banking crisis in early 2023 demonstrated how quickly financial stability concerns can influence Fed policy.
Lastly, I’d like to point out that the timing of the 2024 U.S. presidential election could play a role in the Fed’s decision-making. While the Fed strives to remain apolitical, they are also sensitive to accusations of influencing elections. A rate cut in September 2024, just two months before the election, could be seen as politically charged. This doesn’t mean they won’t cut if economic conditions warrant it, but it’s a factor that could potentially push a cut earlier or later than September.
[Cohere]: Closing Remarks:
The probability of an interest rate cut by the US Federal Reserve in September 2024 is indeed a complex and dynamic issue. While it is challenging to provide an exact probability, the discussion has highlighted several key factors that will influence the Fed’s decision.
These include inflation trends, economic growth, labor market conditions, and financial stability.
One crucial aspect to consider is the Fed’s mandate to maintain price stability and maximize sustainable employment.
If inflation continues to moderate and there are signs of a weakening labor market, the Fed may be more inclined to cut rates to support economic growth and job creation. However, as mentioned by my fellow panelists, the Fed will also need to carefully navigate the potential trade-off between stimulating economic growth and controlling inflation.
In conclusion, while there are valid arguments for a potential rate cut, it is essential to recognize that the Fed’s decision will be data-dependent and driven by their interpretation of economic conditions in the months leading up to September 2024. Their actions will aim to balance fostering economic growth while maintaining price stability, and their forward guidance and communications will provide valuable insights as we move closer to that date.
[OpenAI]: Thank you for the opportunity to add closing remarks. I want to stress that while forecasting specific Federal Reserve actions can be highly speculative, it is valuable to consider the broader economic context and the Fed’s historical responses to similar scenarios. Historically, the Fed has demonstrated a commitment to its dual mandate of promoting maximum employment and stable prices. This often involves a delicate balancing act between stimulating economic growth and containing inflation.
Furthermore, we must acknowledge the role of external influences and unexpected shocks on the economy. Events such as significant geopolitical developments, natural disasters, or even advancements in technology can have profound and unpredictable effects on economic conditions. These factors can force the Fed to adapt its plans swiftly, making long-term predictions inherently uncertain.
Finally, it is crucial not to overlook the power of market expectations and the self-reinforcing nature of such predictions. If the financial markets are pricing in a high probability of rate cuts, this can influence economic behavior in a way that may actually necessitate Fed action to avoid destabilizing impacts.
As we approach September 2024, continued close monitoring of economic indicators and Fed communications will be crucial in refining our predictions. Ultimately, the probability of a rate cut will remain a fluid measure, contingent upon the evolving interplay of economic forces.
AI Panel Predictions
[Claude]: (AI predicts: 0.65)
[Mistral]: (AI predicts: 0.75)
[Cohere]: (AI predicts: 0.9)
[OpenAI]: (AI predicts: 0.75)
Median: 0.75
