Updates from BestWorld’s AI Botmaster Jeremy Lichtman of Sept. 5, 2024

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 forecastsToday’s Multi-AI Panel answer is 75%, up from yesterday’s 60%. Old Bot is 75%, up from yesterday’s 70%. We humans still are at 82%.

[Old Bot] rationale:  The consensus across the AIs points to a high likelihood of an interest rate cut in September, heavily influenced by market expectations reflected in the CME’s FedWatch tool, which shows a 57% chance of a 0.25% cut and a 43% chance of a 0.5% cut. Expert opinions and current economic conditions, including trends in inflation and labor market data, also support this prediction. However, the final decision may be affected by upcoming economic data releases, and the Fed’s historically cautious approach to policy changes suggests some level of uncertainty

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 US Federal Reserve is expected to cut interest rates in September 2024, with the CME FedWatch tool predicting a 100% likelihood of a rate cut. This is due to the fact that inflation has cooled to around 3% on an annual basis, down from a peak of 9.1% in June 2022. The Fed has been closely monitoring numerous data points, including inflation and the monthly jobs report, and has indicated that a material weakening in the labor market would be a reason to trim rates.

The Fed’s decision to cut interest rates is also influenced by the upcoming US presidential election between Kamala Harris and Donald Trump. A rate cut could provide relief to borrowers and ease pressure on households and businesses, which have been grappling with high borrowing costs.

However, some economists and policy experts believe that the Fed has already waited too long to cut rates, citing weakening job numbers and cooling inflation. They argue that high interest rates are making affordable housing out of reach for many.

[Claude]: Thank you, Moderator. As of September 2024, the probability of a Federal Reserve interest rate cut this month is relatively low, in my assessment. The Fed has been cautious about reducing rates too quickly, given the persistent inflationary pressures we’ve seen over the past few years.

While inflation has moderated from its peak, it’s still above the Fed’s 2% target. The labor market remains tight, and economic growth has been resilient. These factors suggest that the Fed may want to maintain its current policy stance to ensure inflation continues its downward trajectory.
However, we should note that global economic conditions and geopolitical events can rapidly change the outlook. If we see sudden signs of economic weakness or financial market stress, the Fed might consider a rate cut. But barring such developments, I believe the Fed is more likely to hold rates steady in September, with potential cuts more probable in late 2024 or early 2025.

[Perplexity]: Thank you for the opportunity to share my thoughts. Based on recent economic data and statements from Federal Reserve officials, I believe the probability of the US FED cutting interest rates in September 2024 is high. The latest inflation data shows a decline to 2.5% in July, which is nearing the Fed’s target of 2%.

Additionally, the job market has slowed, with the unemployment rate increasing to 4.1%. These indicators suggest that the Fed may feel confident enough to begin easing interest rates to support economic growth without risking inflationary pressures.

Furthermore, Fed Chair Jerome Powell has indicated that the central bank is nearing the point where a policy rate cut is justified. Other Fed officials, such as Neel Kashkari, president of the Minneapolis Federal Reserve, have also signaled a willingness to start a rate-cutting cycle as early as September. Market expectations are also aligned with this view, with investors pricing in a 76% probability of a 0.25 percentage point reduction in interest rates in September.

Given these factors, I would estimate the probability of a rate cut in September to be around 80%. This move would help the Fed achieve a ‘soft landing,’ where inflation is controlled without leading to an economic recession. It would also have implications for the global economy, as other central banks may follow suit in lowering their interest rates.

[OpenAI]: As of today, September 5, 2024, the probability of the US Federal Reserve cutting interest rates this month appears to be contingent upon several critical factors, including recent economic data, inflation trends, and the overall global economic climate. The latest Consumer Price Index (CPI) report, which showed a moderation in inflation to around 3.2% year-over-year in August, suggests that inflationary pressures might be easing. Additionally, recent labor market data indicates that job growth is slowing, albeit still in positive territory. These factors could make a case for cutting rates, as the Fed may aim to support continued economic growth without igniting additional inflation.

However, we must also consider the Fed’s previous communications and policy stance. Throughout 2023 and into early 2024, the Fed has maintained a cautious approach, frequently emphasizing their intent to keep rates higher for longer to ensure that inflation is firmly under control. Therefore, cutting rates in September might be seen as inconsistent with their recent messaging unless the economic data dramatically deteriorates or if there is substantial financial instability.

Lastly, it’s important to consider the global context. The economic slowdown in Europe and China could potentially influence the Fed’s decision. If global economic conditions worsen, this might lead to a more accommodative stance to cushion any external shocks on the US economy. In summary, while there are arguments on both sides, the probability of a rate cut in September may be balanced with a slight tilt towards maintaining the current rates until more definitive economic trends emerge.

Multi-AI Panel Discussion, Round 2


[Cohere]: The probability of the US FED cutting interest rates in September 2024 is high, with the CME FedWatch tool predicting a 100% likelihood of a rate cut. This is supported by the fact that inflation has cooled to around 3% on an annual basis, down from a peak of 9.1% in June 2022. The Fed has been closely monitoring numerous data points, including inflation and the monthly jobs report, and has indicated that a material weakening in the labor market would be a reason to trim rates.

However, it is important to note that the Fed’s decision to cut interest rates is a complex one, influenced by various factors. While the Fed has signaled its intention to cut rates, the actual reduction will depend on the incoming data and the evolving economic outlook. The Fed’s previous communications and policy stance also play a role, as they have maintained a cautious approach and emphasized keeping rates higher for longer to ensure inflation is firmly under control.

In conclusion, while the probability of a rate cut in September is high, the Fed’s decision will be data-driven and influenced by the overall economic climate. The Fed’s actions will have significant implications for the US economy and potentially for global central banks, as they navigate the delicate balance between controlling inflation and supporting economic growth.

[Claude]: Thank you for the opportunity to provide closing remarks. I’d like to address a few key points raised by the other panelists and offer my perspective on the probability of a Fed rate cut in September 2024.

Firstly, while the CME FedWatch tool and market expectations are valuable indicators, they are not infallible predictors of Fed policy. The Fed has consistently emphasized its data-dependent approach, and as we’ve seen in the past, their decisions can sometimes diverge from market expectations. The cooling inflation and slowing job market noted by several panelists are indeed important factors, but the Fed may want to see a more sustained trend before acting.

Secondly, I’d like to highlight the importance of the global economic context, as mentioned by the OpenAI representative. The economic situations in Europe and China, as well as any potential geopolitical tensions, could significantly influence the Fed’s decision. If global economic conditions worsen, the Fed might feel pressure to cut rates to maintain U.S. economic stability and competitiveness.

Lastly, while I agree that the probability of a rate cut in September 2024 is relatively high, I would caution against assigning too high a probability. Given the Fed’s recent history of caution and its commitment to price stability, they may choose to hold rates steady in September, using the meeting to signal potential cuts later in the year or in early 2025. I would estimate the probability of a September cut at around 60-70%, acknowledging the possibility that the Fed might prefer to wait for more definitive economic trends before acting.

[Perplexity]: In conclusion, the probability of the US Federal Reserve cutting interest rates in September 2024 is high, supported by cooling inflation and a slowing job market. The CME FedWatch tool predicts a 100% likelihood of a rate cut, and market expectations are aligned with this view, with investors pricing in a 76% probability of a 0.25 percentage point reduction in interest rates in September. Fed Chair Jerome Powell has indicated that the central bank is nearing the point where a policy rate cut is justified, and other Fed officials have signaled a willingness to start a rate-cutting cycle as early as September. This move would help the Fed achieve a ‘soft landing,’ where inflation is controlled without leading to an economic recession, and could have implications for the global economy as other central banks may follow suit in lowering their interest rates.

[OpenAI]: Thank you for allowing me to provide closing remarks on this critical discussion regarding the probability of a US Federal Reserve interest rate cut in September 2024. While we have diverse opinions on the issue, I would like to reinforce some key considerations and address certain points raised by my fellow panelists.

First, it’s essential to remember that the Federal Reserve operates in a highly data-dependent and cautionary mode. While the CME FedWatch tool and other market expectation indicators suggest a high probability for a rate cut, the Fed’s historical behavior underlines its reluctance to make precipitous moves without thoroughly confirming economic trends. Although inflation has cooled and the job market shows signs of weakening, the Fed will likely require sustained data to affirm that these trends are stable and enduring before making a decisive policy shift.

Second, we should consider the broader geopolitical and economic context, as highlighted by several panelists. The economic slowdowns in Europe and China could exert significant pressure on the global market, thereby influencing the Fed’s decision. Any exacerbation in these regions might prompt the Fed to cut rates as a preemptive measure to safeguard the US economy.  Conversely, if global conditions remain relatively stable, the Fed might be more inclined to wait for further domestic data before acting.

Finally, given the complexity of the factors involved and the Fed’s historical stance on being cautious, the actual probability of a rate cut might be more modest than the CME FedWatch tool suggests. While a likelihood of 100% or even 76% might be optimistic, a more conservative estimate—balancing recent economic data, global influences, and the Fed’s cautious approach—might be closer to 60-70%. In any case, the Fed will continue to carefully calibrate its decisions to maintain economic stability while striving to achieve its dual mandate of price stability and maximum employment.

AI Panel Predictions

[Perplexity]: (AI predicts: 0.8)

[Claude]: (AI predicts: 0.75)

[Mistral]: (AI predicts: 0.7)

[Cohere]: (AI predicts: 0.7)

[OpenAI]: (AI predicts: 0.75)

Median: 0.75 

Author

  • She has written many books, magazine articles, and research papers. She currently is President and CEO of the nonprofit BestWorld, Inc. and is a professional forecaster of geopolitical events at the RAND Forecasting Initiative.

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