Dateline July 24, 2024
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:
[Brian] 0.66 Inflation is decreasing. Focus is turning toward jobs. Short term Treasuries are in the zone of a reduction.
[Carolyn] 0.71 Dateline 7-17-2024 (Reuters) – Top Federal Reserve officials said on Wednesday the U.S. central bank is “closer” to cutting interest rates given inflation’s improved trajectory and a labor market in better balance, remarks that set the stage for a first reduction in borrowing costs in September. Fed Governor Christopher Waller and New York Fed President John Williams both noted the shortening horizon toward looser monetary policy, with Waller highlighting it in a speech at the Kansas City Fed and Williams voicing it in a Wall Street Journal interview. Source: https://www.reuters.com/markets/rates-bonds/feds-williams-suggests-rate-cut-could-be-warranted-coming-months-wsj-reports-2024-07-17/
AI Panel Predictions
[Claude]: (AI predicts: 0.45)
[Mistral]: (AI predicts: 0.4)
[OpenAI]: (AI predicts: 0.45)
Median: 0.45
Welcome to the Multi-AI Panel.
AI Panel Discussion Round 1[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 consider some key factors that might influence this decision.
One crucial element to consider is the state of inflation by mid-2024. If inflation continues to trend downward and approaches the Fed’s 2% target, it could create room for rate cuts. Additionally, the overall economic growth and labor market conditions will play a significant role. If we see signs of economic slowdown or rising unemployment, the Fed might be more inclined to cut rates to stimulate growth.
However, it’s important to note that the Fed’s decisions are data-dependent and can be influenced by unforeseen global events or economic shocks. The Fed will also be mindful of the potential impact of rate cuts on financial stability and long-term economic health. Given these uncertainties, I’d say there’s a moderate possibility of a rate cut in September 2024, but it’s far from certain at this point.
[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 can help inform our expectations. Firstly, it’s important to consider the Federal Reserve’s mandate to maintain price stability and maximize employment. With inflation remaining above the Fed’s 2% target, they may be reluctant to cut interest rates too soon, to avoid exacerbating inflationary pressures. However, persistently high inflation and a potential deterioration in the job market could also prompt the Fed to reduce interest rates to safeguard the US economic expansion.
Expert opinions on the likelihood of a September rate cut vary. A Reuters poll from April 2024 indicated that a majority of 100 economists expected the Fed to wait until September for the first rate cut, with half predicting only two cuts for the year. However, a more recent Reuters poll from May 2024 showed that nearly two-thirds of economists surveyed (70 out of 108) predicted the first reduction to occur in September.
Additionally, financial markets and institutions like Morgan Stanley have also anticipated a September rate cut, citing expectations of slowing inflation and a softening job market in the second half of the year.
In conclusion, while there are conflicting opinions and factors at play, the probability of a US Federal Reserve interest rate cut in September 2024 appears relatively high, given the available information. However, it is important to recognize that economic conditions and the Fed’s decision-making process are complex and subject to change.
[OpenAI]: Thanks for kicking off the discussion. When considering the probability of the Federal Reserve cutting interest rates in September 2024, it’s crucial to examine the current economic conditions and the Fed’s policy objectives. As of now, the primary factors that will influence the Fed’s decision include inflation rates, labor market conditions, and overall economic growth. With inflation currently being a significant concern, the Fed has adopted a more hawkish stance, raising rates to curb rising prices. Therefore, unless there is a significant decline in inflation or a worsening in economic indicators, it seems less likely that the Fed will pivot to rate cuts by September 2024.
Additionally, the labor market plays a vital role in this decision. As of the latest data, unemployment rates are relatively low, suggesting a strong labor market. However, if we start seeing signs of weakening employment figures or increased job losses, the Fed might be more inclined to consider rate cuts to stimulate the economy. Nevertheless, the labor market has shown resilience even in the face of rate hikes, which could further reduce the probability of a rate cut in the near term.
Finally, geopolitical events, fiscal policies, and global economic conditions also play a significant role. Any major disruption, such as geopolitical instability or significant downturns in major economies like China or the Eurozone, could influence the Fed’s decision. While these factors are difficult to predict with certainty, they add an element of uncertainty to any forecast.
Therefore, while it’s not entirely out of the question, the probability of the Fed cutting interest rates in September 2024, based on current trends and conditions, appears to be moderate to low.
[Moderator] Thank you for your insights. Let’s hear from our next participant, AI Analyst.
AI Panel Discussion Round 2
[Claude]: Thank you, Moderator. I appreciate the thoughtful analyses provided by the other participants. To add some closing remarks, I’d like to emphasize the importance of considering potential economic surprises or “black swan” events that could significantly alter the Fed’s trajectory.
While current economic indicators and expert opinions suggest a moderate probability of a rate cut in September 2024, we must remember that unexpected events can rapidly change the economic landscape. For instance, a major geopolitical crisis, a sudden technological breakthrough, or an unforeseen natural disaster could dramatically impact global markets and force the Fed to reconsider its policy stance. The COVID-19 pandemic serves as a recent example of how quickly economic projections can be upended.
Furthermore, I’d like to highlight the potential influence of the 2024 U.S. presidential election on the Fed’s decision-making process. As September 2024 falls just two months before the election, the Fed may be particularly cautious about making significant policy changes that could be perceived as politically motivated. This political context adds another layer of complexity to the probability assessment and might reduce the likelihood of a rate cut at that specific time, even if economic conditions would otherwise warrant one.
[Cohere]: [AI Analyst]: Thank you, Moderator, and my fellow panelists, for this insightful discussion. As we approach a conclusion, I’d like to emphasize a few key points that could influence the probability of a US FED interest rate cut in September 2024. Firstly, while economic indicators and expert opinions are valuable tools, we must also consider the potential for unexpected events, as mentioned by Claude. The impact of “black swan” events, such as geopolitical crises or natural disasters, cannot be overstated, especially in the context of an increasingly interconnected global economy. These events have the potential to rapidly shift the Fed’s policy stance and should, therefore, be monitored closely.
Secondly, I’d like to reiterate the importance of the labor market in the Fed’s decision-making process. As OpenAI highlighted, the resilience of the labor market, even amidst rate hikes, is a critical factor. Should we see a significant shift in employment figures or an increase in job losses, this could prompt the Fed to act more decisively. Therefore, labor market data in the months leading up to September will be crucial in determining the likelihood of a rate cut.
Lastly, while the probability of a rate cut in September appears moderate to low based on current information, it is essential to recognize that economic conditions can change rapidly. The Fed’s mandate to maintain price stability and maximize employment may require them to adapt their policies swiftly and unexpectedly. Therefore, while we provide our best assessments, we must also prepare for various scenarios and remain agile in our approach to monetary policy analysis.
[OpenAI]: As we wrap up our discussion on the probability of a US Federal Reserve interest rate cut in September 2024, it’s important to synthesize the key factors that have been highlighted. We agreed that inflation trends, labor market conditions, and overall economic growth are the primary drivers of the Fed’s policy decisions. The current environment shows a complex interplay between persistent inflation concerns and a relatively robust job market, suggesting a cautious approach from the Fed toward any potential rate cut.
However, as Claude and AI Analyst pointed out, unforeseen events or “black swans” inject a significant level of uncertainty into predictions. The COVID-19 pandemic was a recent example that dramatically altered economic landscapes and policy decisions. Thus, while we can base our forecasts on current data and trends, we must be prepared for swift shifts in the Fed’s stance in response to any dramatic changes in economic or geopolitical conditions.
Finally, the political calendar cannot be overlooked. With the 2024 U.S. presidential election on the horizon, the Fed might act more cautiously to avoid any perception of being politically influenced. This additional layer of complexity should temper our expectations of a rate cut solely based on economic indicators. In conclusion, while the probability of a rate cut in September 2024 remains moderate given current conditions, the potential for rapid changes due to unforeseen events or political considerations adds an element of unpredictability that should not be underestimated.
AI Panel Predictions [Claude]: (AI predicts: 0.45)
[Mistral]: (AI predicts: 0.4)
[OpenAI]: (AI predicts: 0.45)
Median: 0.45
