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?”
Today’s BestWorld staff’s answer: 71% likely.
Today’s Multi-AI Panel answer: 40% likely.
How we decided this:
27-July-2024 [Brian] 0.75 Inflation is looking better behaved, the unemployment rate is on the rise, and there is growing evidence that consumer spending iscooling
28-July-2024 Brian 0.78 Drop in Michigan Consumer Sentiment index. Sources: https://seekingalpha.com/article/4707389-michigan-consumer-sentiment-drops-to-8-month-low https://economics.td.com/us-disconnect-between-consumer-economic-data/
28-July-2024 [Carolyn] 0.8 Job growth is moderating, suggesting increased likelihood on the Fed dropping the rate soon. https://www.bloomberg.com/ news/articles/2024-07-27/fed-rate-cuts-fomc-is-about-to-nod-at-a-move-as-job-growth-moderates
29-July-2024 [Carolyn] 0.81 At each of their four meetings this year, interest-rate cuts have been a question for later. This time, though, inflation and labor-market developments should allow officials to signal a cut is very possible at their next meeting, in September. https://www.wsj.com/economy/central-banking/fed-near-interest-rate-cut-d303dbd5
Median 0.71
Our prosective Brier Scores given our forecasts since 19 July 2024:
If the FED raises rates in September and it resolves Yes, 0.17
If it resolves No 1.01
Our forecasts of 26 July 2024 —>
Our forecasts of 25 July 2024 —>
Our forecasts of 24 July 2024 —>
Our forecasts of 23 July 2024 —>
See more about our AI vs human forecasting research 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?
AI Panel Discussion Round 1
[Claude]: Thank you, Moderator. When considering the probability of a Federal Reserve interest rate cut in September 2024, we must account for several factors that could influence this decision.
Firstly, the current economic landscape and future projections play a crucial role. If inflation continues to moderate and approaches the Fed’s 2% target, it could create room for rate cuts. However, if economic growth remains robust and inflation persists above target, the Fed may be inclined to maintain higher rates for longer.
Additionally, global economic conditions, geopolitical events, and domestic political factors (such as the 2024 presidential election) could impact the Fed’s decision-making process. While it’s challenging to predict with certainty this far in advance, I’d estimate a moderate probability of a rate cut in September 2024, perhaps around 40-50%, assuming a gradual economic slowdown and inflation control. However, this estimate could change significantly as we approach the date and gather more economic data.
[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 inflation, which has been persistently above their 2% target. While there were hopes for rate cuts earlier in the year, the Fed has indicated that it wants to see more positive data and a sustained downward trend in inflation before making any cuts.
Recent data shows that inflation has cooled slightly, with the consumer price index falling to 3% in June 2024, the lowest in over three years. This could give the Fed more confidence to start cutting rates. Additionally, there are expectations that price inflation in certain areas will continue to ease, further supporting the case for a rate cut.
Expert opinions are varied, with some predicting a September rate cut and others expecting the Fed to wait longer. A Reuters poll from July 2024 suggested that a majority of 100 economists expected the first rate cut to happen in September, with half expecting two cuts this year and a third forecasting more. However, Fed Chair Jerome Powell has indicated that it may take longer to achieve the desired confidence in inflation returning to the target level.
In conclusion, while there are indications that a September 2024 rate cut is possible, the Federal Reserve’s decision will depend on their interpretation of the latest economic data and their confidence in inflation being under control.
[OpenAI]: The probability of the US Federal Reserve (the Fed) cutting interest rates in September 2024 hinges on several factors, including economic growth, inflation rates, and labor market conditions. As of now, the Fed’s primary aim is to manage inflation while fostering maximum employment. If inflation remains above the Fed’s target rate of 2% and the labor market remains tight, it is less likely that the Fed will cut interest rates. Conversely, if economic data suggests a slowdown in growth and a stabilization or decrease in inflation, the probability of a rate cut increases.
Additionally, global economic conditions will also play a role. External factors such as geopolitical tensions, global supply chain issues, or financial instability in other regions can affect the US economy and influence the Fed’s decisions. For instance, a significant economic downturn in major economies like China or the European Union could necessitate a more accommodative monetary policy from the Fed to buffer the US economy.
Market expectations and sentiment are also critical. Financial markets often predict policy moves based on economic indicators and Fed communication. If the general market consensus trends toward a pessimistic outlook, it might pressure the Fed to adopt a looser monetary policy.
onversely, strong earnings reports and consumer spending data can alleviate such pressures. Current modeling tools and economic forecasts would be advisable to keep an eye on to gauge the evolving probability as more data comes to light.
Now, let’s hear from the other panelists.
Multi-AI Panel Discussion Round 2
AI Panel Discussion Round 2
[Claude]: Thank you for the opportunity to provide closing remarks. Building on the insightful comments from my fellow panelists, I’d like to emphasize a few key points and add some additional perspectives on the probability of a Fed rate cut in September 2024.
First, I agree that the economic data leading up to September 2024 will be crucial in determining the Fed’s actions. While current trends suggest a cooling of inflation, it’s important to note that the Fed has consistently communicated its commitment to seeing sustained progress towards its 2% inflation target before considering rate cuts. This suggests that even if inflation continues to moderate, the Fed may be cautious about cutting rates too quickly, especially if the labor market remains strong. The Fed’s dual mandate of price stability and maximum employment means they must balance these factors carefully.
Second, I’d like to highlight the potential impact of the 2024 U.S. presidential election, which will take place in November. Historically, the Fed has tried to avoid actions that could be perceived as influencing election outcomes. A rate cut in September, just two months before the election, might be seen as politically charged. This political consideration could potentially lower the probability of a September rate cut, even if economic conditions otherwise warrant one.
Lastly, while market expectations are indeed important, as mentioned by OpenAI, I’d caution against overemphasizing their influence on Fed policy. The Fed has shown willingness in the past to act contrary to market expectations when it believes it’s necessary for long-term economic stability. Therefore, while market sentiment is a factor to consider, the Fed’s own economic projections and policy goals are likely to be more determinative.
Given these considerations, I would estimate the probability of a September 2024 rate cut to be somewhat lower than previously suggested, perhaps in the 30-40% range, but this could change significantly as we get closer to the date and have more economic data to analyze.
[Cohere]: I appreciate the opportunity to provide some closing thoughts on this insightful discussion. The probability of a Federal Reserve interest rate cut in September hinges on a delicate balance of factors, as my fellow panelists have eloquently outlined. While economic data, inflation trends, and labor market conditions will be pivotal, I’d like to emphasize three additional nuances.
Firstly, the Fed’s communication and guidance have been crucial in shaping market expectations. Their forward guidance has been a powerful tool in influencing the market’s perception of future rate decisions. Therefore, any subtle shifts in their language or tone in the coming months could significantly impact the likelihood of a September rate cut.
Secondly, while the Fed’s dual mandate of price stability and maximum employment is well-known, their recent focus on financial stability cannot be overlooked. The Fed is increasingly cognizant of the impact of their policies on financial stability, and this could be a key consideration in their decision-making process.
Lastly, the global context is important. The actions of other central banks, particularly in major economies, could influence the Fed’s decision. If other central banks continue to tighten monetary policy, the Fed may feel less pressure to maintain higher rates, increasing the likelihood of a cut.
In conclusion, while a challenging prediction, I agree with the moderate probability estimates outlined by my fellow panelists, sitting at around 40-50%. This probability is highly dependent on the economic data and trends that unfold in the coming months, as well as the Fed’s interpretation of these developments.
[OpenAI]: As we wrap up this discussion, I want to highlight several points that could tilt the probability of a Federal Reserve interest rate cut one way or the other by September 2024.
First, it’s imperative to consider the structural shifts in the economy that could affect the Fed’s decision. For instance, advancements in technology, changes in consumer behavior, and shifts in labor market dynamics due to automation could all play a role in influencing inflation and employment metrics. If technology drives productivity gains but simultaneously suppresses wage growth, the Fed might encounter a different inflationary landscape than current models predict.
Second, it’s key to consider the potential “unknown unknowns” – events or factors scarcely anyone can foresee now but could drastically alter the economic calculus. Examples include sudden geopolitical developments, an unforeseen natural disaster, or a major financial crisis in another part of the world. Such events could necessitate a swift and aggressive monetary policy response from the Fed, including rate cuts.
Finally, although the upcoming presidential election adds a layer of complexity, it’s worth noting that the Fed aims to be apolitical and data-driven in its decision-making. While political considerations might subtly influence timing, the overarching driver will still be the economic data at hand. Thus, my estimation of the probability of a rate cut remains cautiously in line with previous assessments – around 35-45% – acknowledging the highly fluid nature of macroeconomic conditions.
In summary, while the landscape is multifaceted and fraught with uncertainties, staying attuned to incoming data, Fed communications, and emerging global trends will be crucial in refining any prediction.
AI Panel Predictions
[Claude]: (AI predicts: 0.4)
[Mistral]: (AI predicts: 0.4)
[Cohere]: (AI predicts: 0.4)
[OpenAI]: (AI predicts: 0.4)
Median: 0.4
