Economy

The Fed finally delivered on its promise to slash interest rates

The time has finally come. On Wednesday, Federal Reserve Chair Jerome Powell announced an interest rate cut at long last. The decision marks the first time rates have been cut by the central bank since the early days of the pandemic in 2020.

The long-awaited cut was pushed by economists (and everyone else) since spring, but the Fed kept pushing back dates until it had concrete proof that inflation was slowing. While everyone under the sun knew a rate cut was coming Wednesday, there was no way to know how much they would cut rates by… and the Fed made a bold move.

Half-point measures

Starting hot with an aggressive slash, the Fed announced a half-percentage-point (50 basis points) reduction in borrowing costs. The central bank signaled that it was currently more concerned with the labor market than inflation by setting its benchmark rate between 4.75% and 5%.

• Amid a recent hiring decline, the current unemployment rate is resting at around 4.2%.

• The Fed is also getting closer to its 2% inflation target, with last week’s consumer price index report showing inflation is slowing to 2.5% year over year.

The rise in the unemployment rate this year (which Powell said was worrying) combined with cooling inflation gave Fed officials the confidence to cut rates by 0.5%, although Powell said the economy and job market are still in “good shape.”

Looking forward: It appears that most economists have had enough about recessions and are looking forward to further rate reduction, which could hypothetically bring interest rates closer to 3% by the end of 2026.

P.S. The Fed and its connection to the economy can be a bit confusing, so here is a reminder of what the Fed does for us (see video here).

Technology

The battle for TikTok to remain in the US has begun

Hopefully they argue well because I need to waste more screen time. At the start of the week, TikTok started making its case for why its app should stay on Americans’ phones to a federal appeals court.

It marks the beginning of the video-sharing platform’s argument against the April law passed by Congress, which will ban the app unless it is acquired by a US corporation by January 19th.

There are high stakes: The resolution of TikTok's legal battle with the Justice Department will determine the company's future in its largest user base and set a precedent for international social media businesses that operate in the US.

TikTok’s argument

TikTok attempted to persuade the panel of (largely doubtful) judges that a ban would be unlawful and undercut the First Amendment rights of its 170 million American users, including the right to choose a publisher and editor of their choice.

• The platform asserts that a sale is not only impractical but unachievable, especially considering the January deadline.

• Some TikTok creators (who are technically co-plaintiffs) argued that a ban is unconstitutional and violates the First Amendment, which includes the right to choose a publisher and editor of their choice.

The court seemed to put TikTok’s claim that a ban would violate First Amendment rights into question, saying the law that would ban the app focuses on the company’s ownership structure, not speech.

The government’s argument

According to the law passed in April (which drew support from both parties), TikTok presents a risk to national security because Chinese regulations allow the government to collect user data from Americans who use the app on demand.

• According to the US government, the software can also be used to disseminate Chinese propaganda.

TikTok then claimed Congress failed to provide sufficient evidence to justify a ban based on national security concerns, pointing out that a large portion of the purported information is classified.

• While this may be true, the judges were able to review unclassified versions of the DOJ’s evidence.

• Additionally, the government claims if the material was declassified it would cause “exceptionally grave” harm to national security interests.

The DOJ also says that China has extreme leverage over TikTok’s algorithm, partially because the code is made domestically. This is a claim that ByteDance, TikTok’s parent company has refuted repeatedly.

America (unsurprisingly) wants TikTok: According to a poll by Pew Research Center, Americans who support a ban decreased from 50% in March 2023 to 32% this summer. A decision regarding the fate of the wildly popular Chinese app is expected as soon as November.

Robots will soon be making your Chipotle bowl

This better help me get my double chicken portioned right. At two California locations, Chipotle has started using robots (which were previously confined to the chain’s test kitchen) that will help with various tasks to make your order.

The purpose of Chipotle's robot research, according to a statement, is to "help our restaurant employees continue providing great hospitality for our guests," and to identify areas of efficiency.

The fast-casual chain announced this week that feedback on the machines will determine if they start using them at other locations throughout the US.

The Autocado machine

Yes, the robot is literally called the “Autocado”.

Chipotle’s Huntington Beach location is testing a device that, on average, takes 26 seconds to chop, skin, and core one avocado (see video here). A human employee then places the avocado inside a bowl to, well, turn it into guacamole.

• The Autocado should help increase efficiency, as Chipotle says it takes almost an hour to make its fresh guac by hand.

• Chipotle predicts it will use over 130 million pounds of the green vegetable fruit this year.

But wait, there’s more!

Chipotle has also dispatched the “augmented makeline,” which sounds a lot more stupid than the Autocado, that will prepare your salads and burrito bowls, which make up the majority of online orders.

With these two robots, which Chipotle invested in through a $100 million venture fund, the chain is hoping to hire fewer workers while increasing productivity.

Chipotle has experimented with robots before: "Chippy," an automated device for seasoning tortilla chips, was used for a while until Chipotle said labor savings were largely offset by installation and clean-up costs.

A comparable automatic bowl-making robot has already been introduced by Sweetgreen, which it used to open "Infinity Kitchens" in a few places, including California.

Grab Bag

The White House targets Temu and Shein with taxes

Your “premium metal chain bracelet” that you ordered might take a little longer to get to your mailbox now. Everyday, fast fashion online retailers Temu and Shein export an abundance of boxes containing cheap goods to customers in America with little to no tax attached.

The Biden administration is changing that. Last week, the administration unveiled new regulations that will close an import tax loophole by requiring online merchants like Shein and Temu to pay taxes on their goods for the first time.

What’s the loophole?

It’s called the de minimis rule, which allows low-cost imports ($800 and under) to go through customs more easily, skipping extra declarations and costs. The rule has been a part of US trade law since 1930, but now White House officials are attempting to skirt the use of it.

• According to the administration, the number of shipments entering the US under the de minimis rule has increased from 140 million a decade ago to over a billion annually.

  • A senior Biden administration official said the amount has become “too high a volume" in order for agents to do their jobs correctly.

Opposers of the de minimis rule claim the exception has allowed fast fashion retailers like Shein and Temu to curtail inspections, allowing for an increase in shipments that contain illegal products, like fentanyl.

• The new trade rule, proposed by the White House, includes a stipulation that would allow US Customs to better inspect the packages through a new information disclosure mandate.

Tough taxes: The announcement of the rule coincided with the significant US tariff hikes imposed by the Biden administration on around $18 billion worth of Chinese goods. The tariff increases included 100% charges on electric vehicles, 50% on chips and solar cells, and 25% on lithium-ion batteries, steel, and aluminum.

Instagram took steps to protect teens

Hopefully, this means we see a lot fewer influencers under the age of 18. The massive social media platform unveiled its most extensive set of safeguards for children on Tuesday in response to mounting public criticism and political backlash.

User friendly

Instagram has completely changed how anyone not of legal age will use the platform, designating any current and new accounts for those 18 and under as “Teen Accounts,” along with other big changes:

• All accounts for users under 18 will automatically be made private.

• Parents can now view the names of the people their children direct message, but not the content of those messages.

  • They will also be able to see what posts their kids deliberately choose to see more of on the platform’s Explore page.

• Users under the age of 16 will require permission via the app's parental supervision feature to adjust their privacy settings.

• Another feature coming to Teen Accounts is "Sleep Mode," which disables alerts from 10 pm to 7 am.

Instagram is also working on a new feature to verify users’ ages properly, because, well, people lie about their ages. The platform said the method would likely utilize AI and require users to upload some sort of ID or take a live video selfie to prove their age.

All about the kids: Instagram's parent company, Meta, is being sued by multiple states alleging it created apps that addict children. And earlier this summer, the Senate passed a divisive bill regarding the internet safety of children.

Fast Facts

Belittling Blindness: Neuralink received Breakthrough Device Designation from the FDA for its Blindsight product, which Elon Musk says “will enable those who have been blind from birth to see for the first time.”

Food Frenzy: Today is national fried rice, pizza, and string cheese day. Not sure there is a better time to order Chinese and Domino’s.

Stunning Stats: Since you’ve read this 12,000 skin cells have been shed from your body. Click here to see what else has happened in the past 10 seconds.

Never Say Goodbye: Jon Bon Jovi likely saved a woman’s life when he took a break from filming a music video to talk her off the edge of a Nashville bridge.

iPhone Interest: You can do a lot with Apple’s new iOS 18 software update... from customizing the color of apps to using all new messaging tools, you’re sure to up your screen time.