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I created a little Bayesian interest rate predictor in Python a while back.

Today I updated the models with the latest FOMC meeting statements. I also spruced up the code a bit.

Here are the latest code, models, and data:
FedBayes.zip (~140 KB)

Here are the latest predictions for what will happen at the next meeting:

Rate Change / Probability
0% = 0.403
0.25% = 0.330
-0.5% = 0.237
-0.25% = 0.005
0.5% = ~0

Do these predictions sound reasonable to you? I think it’s interesting how the model predicts that the second and third most likely scenarios are an increase in rate, or another drastic cut. It does mirror how I believe the Fed currently sees things i.e., inflation could get bad so we have to raise rates, or the economy could just get really bad (major slowdown).

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This entry was posted on Sunday, September 23rd, 2007 at 11:19 pm and is filed under Python, Announcements. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.