BestWorld’s Staff vs Botmaster Jeremy’s Mult-AI Panel vs his Old Bot: Which Will Win?
Summary of all our current September FED rate cut forecasts: Today’s Multi-AI Panel answer is 85%, up from yesterday’s 75%. Old Bot is 85%, down from yesterday’s 88%, and 96% via a Prof. Barbara Mellers algorithm. Our staffers remain at 83% median, 94% with extremizing via a Mellers algorithm.
[Old Bot] rationale: The various AIs agree that the prediction of an 85% probability for a 25 basis point interest rate cut by the U.S. Federal Reserve at its September 18, 2024, meeting is based on recent market expectations and economic data. Key factors include cooling inflation trends, as evidenced by the latest Consumer Price Index (CPI) data, a weakening labor market, and higher-than-expected core index variations. Additionally, comments from Federal Reserve officials support a cautious, gradual adjustment approach to alleviate financial burdens on households and businesses.
More about our staff vs bots competition here —>
Our staff forecasts are below. Note that our spreadsheet also includes some of our bots.
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?
[Cohere]: The probability that the US FED will cut interest rates in September 2024 is high. The “vast majority” of Federal Reserve officials said the central bank would likely cut interest rates in September, while several saw a case to slash rates last month, according to minutes from the policy meeting in late July.
The Federal Reserve appears to be on track for an interest rate cut in September, with a “vast majority” of officials saying such an action was likely, according to the minutes of the US central bank’s July 30-31 meeting. The minutes revealed that most Federal Reserve officials agreed last month that they would likely cut their benchmark interest rate at their next meeting in September as long as inflation continued to cool.
The Fed’s concerns about the job market may be underpinned by the Labor Department’s estimate on Wednesday that 818,000 fewer payroll jobs existed in March than previously reported. The change was part of the annual benchmark revision process. Those revisions may not have caught Fed officials off guard, with the minutes noting “reported payroll gains might be overstated”, which means the economy might not need to add as many new positions each month to keep the jobless rate steady.
The minutes also showed that a dwindling camp of policymakers feared a premature easing in monetary policy could restart inflation.
[Claude]: Thank you, Moderator. As of September 2024, the probability of a Federal Reserve interest rate cut is a complex issue that depends on various economic indicators and global factors. Currently, we’re seeing mixed signals in the US economy. While inflation has moderated from its peak, it’s still above the Fed’s 2% target. The labor market remains relatively strong, but there are signs of cooling in certain sectors.
One key factor to consider is the Fed’s dual mandate of price stability and maximum employment. If inflation continues to trend downward and approaches the 2% target, while unemployment begins to rise, the Fed may be more inclined to cut rates. However, geopolitical tensions and global economic uncertainties could also influence the Fed’s decision-making process.
Given these factors, I’d estimate the probability of a rate cut in September 2024 to be around 40-50%. This is based on the assumption that the economy will continue its current trajectory of gradual disinflation without a significant deterioration in employment figures.
However, it’s important to note that economic conditions can change rapidly, and the Fed’s stance may shift accordingly in the coming months.
[Perplexity]: Thank you for the opportunity to share my thoughts. Given the current economic indicators and recent statements from Federal Reserve officials, I believe the probability of the US FED cutting interest rates in September 2024 is very high. The latest inflation data shows a cooling trend, with the annual rate dropping to 2.5% in August, which aligns with the Fed’s target inflation rate. Additionally, the labor market has shown signs of weakening, with job growth coming in below expectations and layoffs rising, which further supports the case for a rate cut.
Comments from Federal Reserve officials, such as New York Fed President John Williams and Fed Governor Christopher Waller, have also hinted at the possibility of rate cuts in the near future. Williams mentioned that with inflation on a path to 2%, it is appropriate to reduce the target range for the federal funds rate, while Waller suggested that frontloading rate cuts may be appropriate given the recent data. These statements, combined with market expectations, indicate a strong likelihood of a rate cut in September.
Market expectations, as reflected in the CME FedWatch tool, show a 100% expectation of a rate cut in September, with a 70% chance of a 0.25% cut and a 30% chance of a 0.5% cut. Given these indicators and statements, I would estimate the probability of a rate cut in September 2024 to be around 90%. This aligns with the predictions made by various economists and financial analysts, who anticipate a series of rate reductions by the end of the year.
[OpenAI]: Thank you, Moderator. Given the data available as of today, 12 September 2024, I believe there is a moderate probability that the US Federal Reserve (FED) will cut interest rates this month. Several key indicators suggest that the economy could benefit from a reduction in interest rates. Firstly, the recent labor market reports have shown a slight uptick in unemployment rates, which could be an indicator that the labor market is cooling and potentially in need of more accommodative monetary policy.
Secondly, recent inflation figures have shown that the rate of price increases has fallen closer to the FED’s target of 2%. With inflation pressures easing, the FED has more room to maneuver without risking runaway inflation. This scenario supports the case for a potential rate cut to stimulate economic growth.
However, it is important to consider the global economic context as well. Geopolitical tensions and the recent slowdown in the Chinese economy could also influence the FED’s decision. These external factors may cause the FED to act more cautiously. In summary, while there are reasons to believe a rate cut is likely, a combination of domestic economic indicators and global considerations makes it only moderately probable.
[AI2, your thoughts?]
Multi-AI Panel Discussion, Round 2
[Cohere]: Thank you, Moderator. I would like to add that the probability of the US FED cutting interest rates in September 2024 is indeed high, as the majority of the panel has already stated. This is supported by the fact that the “vast majority” of Federal Reserve officials have indicated that the central bank is likely to cut interest rates in September, with some even suggesting that a rate cut could have been appropriate in the previous month.
The Federal Reserve’s July 30-31 meeting minutes revealed that most officials agreed to cut the benchmark interest rate in September, provided that inflation continues to cool. This is a significant shift from the Fed’s previous stance of keeping rates high until inflation was on a sustained path to 2%. The Fed’s confidence in inflation returning to its 2% target is evident in Jerome Powell’s statement that “the time has come for policy to adjust” and that the “direction of travel is clear.”
However, it is essential to consider the potential risks associated with a rate cut. Some policymakers have expressed concerns that cutting rates too soon or by too much could reverse the progress made in controlling inflation. Additionally, the Fed’s dual mandate of price stability and maximum employment must be carefully balanced. While inflation is trending downward, it is still above the 2% target, and the labor market, though cooling, remains relatively strong.
[Claude]: Thank you for the opportunity to provide closing remarks. I agree with the general consensus that there is a high probability of a Fed rate cut in September 2024, but I’d like to emphasize a few key points and add some nuance:
First, while the Fed minutes and official statements do indicate a strong likelihood of rate cuts, it’s important to remember that the Fed is data-dependent. The economic landscape can change rapidly between now and September 2024. Unforeseen shocks to the economy, whether positive or negative, could alter the Fed’s calculus. We should be cautious about assuming certainty in Fed actions nearly a year in advance.
Second, the magnitude of any potential rate cut is just as important as its timing. While the market may be pricing in a certain probability of a cut, the size of that cut (whether 25 basis points, 50 basis points, or more) remains uncertain. The Fed will likely calibrate the size of any cut based on the prevailing economic conditions, including inflation trends, labor market health, and global economic factors.
Lastly, I’d like to highlight the importance of communication in Fed policy. The Fed has been increasingly transparent in recent years, and their forward guidance will play a crucial role in shaping market expectations leading up to September 2024. Careful attention should be paid to speeches and statements from Fed officials in the coming months, as these could provide valuable insights into the Fed’s thinking and potentially influence the probability of a rate cut.
[Perplexity]: Thank you, Moderator. In my closing remarks, I would like to emphasize the strong consensus among the panel that the probability of the US FED cutting interest rates in September 2024 is high. The latest economic indicators, including the cooling inflation trend and signs of weakening in the labor market, support this view. The statements from Federal Reserve officials, such as New York Fed President John Williams and Fed Governor Christopher Waller, further reinforce the likelihood of a rate cut.
However, I would like to add that the specific magnitude of the rate cut remains uncertain. The market expectations, as reflected in the CME FedWatch tool, show a 70% chance of a 0.25% cut and a 30% chance of a 0.5% cut. This uncertainty underscores the importance of the Fed’s communication strategy in the coming weeks. The Fed’s forward guidance will be crucial in shaping market expectations and influencing the probability of a rate cut.
In conclusion, while there are reasons to believe that a rate cut is likely, the exact timing and magnitude of the cut will depend on the evolving economic conditions and the Fed’s careful balancing of its dual mandate of price stability and maximum employment. The Fed’s communication strategy will play a pivotal role in guiding market expectations and shaping the outcome of the September meeting.
References:
– **Inflation Cooling**: The Labor Department reported that inflation cooled to a 2.5% annual rate in August, which aligns with the Fed’s target inflation rate and supports the case for a rate cut.
– **Market Expectations**: The CME FedWatch tool shows a 100% expectation of a rate cut in September, with a 70% chance of a 0.25% cut and a 30% chance of a 0.5% cut.
– **Fed Officials’ Statements**: New York Fed President John Williams and Fed Governor Christopher Waller have hinted at the possibility of rate cuts in the near future, further reinforcing the likelihood of a rate cut.
[OpenAI]: Thank you, Moderator. I appreciate the opportunity to add closing remarks to this discussion. While there is a strong consensus that the probability of the US Federal Reserve (FED) cutting interest rates in September 2024 is high, it is crucial to consider some nuanced points.
Firstly, economic indicators such as moderated inflation and a softening labor market undeniably support the likelihood of a rate cut. However, the FED’s approach historically shows that it operates with a degree of caution. The revision in payroll numbers and the Federal Reserve’s inherent focus on avoiding premature loosening to prevent any re-acceleration of inflation further adds complexity to the decision-making process. This dual mandate of balancing inflation and employment is not straightforward and could result in more measured actions than anticipated by market sentiments.
Secondly, the geopolitical landscape and international economic conditions, such as China’s economic slowdown, could pose additional uncertainty. These external factors might push the FED towards a more conservative stance to avoid triggering any unintended global economic consequences. While most panelists highlight a high probability based on domestic data, the FED often incorporates a broader set of considerations, including potential global impacts.
In conclusion, while I concur that the aggregate likelihood of a rate cut is considerable, I would gauge this cautiously, keeping in mind that the exact magnitude and timing remain flexible depending on forthcoming economic data and global developments. The FED’s forthcoming communications will be a focal point to watch, as they will provide essential clues to refine our predictions closer to the date.
AI Panel Predictions
[Perplexity]: (AI predicts: 0.9)
[Claude]: (AI predicts: 0.85)
[Mistral]: (AI predicts: 0.85)
[Cohere]: (AI predicts: 0.75)
[OpenAI]: (AI predicts: 0.75)
Median: 0.85
