The Fed's Grip is Slipping: Beware the Unraveling Economy

Originally featured in CNN Business Before the Bell newsletter, this story discusses a significant inflation crisis in America, which is the first of its kind in many years. Alongside this crisis, the Federal Reserve has implemented aggressive interest rate hikes to address the issue. As a consequence, both Main Street and Wall Street have experienced a turbulent couple of years. This scenario has negatively impacted consumers and has caused investors to constantly question their decisions.

However, analysts argue that the Federal Reserve's impact on the economy is not as significant as it once was. While market reactions to the Fed's policy announcements may still be strong, the lasting effects on stock prices and inflation are becoming more limited.

Currently, after experiencing a rollercoaster ride due to Fed policy for the past 18 months, investors are longing for a return to stability and predictability.

Joe Brusuelas, RSM US chief economist, stated that Federal Reserve Chair Jerome Powell indicated at the Economic Club of New York that the central bank is no longer in control of the inflation narrative.

The change in tone from March 2022 is worth noting, as it marked a significant departure from the Federal Reserve's long-standing practice of keeping interest rates low. Instead, they swiftly implemented a string of forceful rate hikes in an effort to combat the exceptionally high levels of inflation. This abrupt shift in policy had a notable impact on investors who had grown accustomed to near-zero rates, causing significant reactions in both the stock market and the overall economy.

Inflation has significantly decreased, eliminating the necessity for such drastic measures. Powell stated last week that the Fed is unwilling to take substantial actions that could potentially harm the economy unnecessarily.

According to Brusuelas, the upcoming Fed meeting, starting on Halloween, has already been taken into account by the market and is seen as a "status quo policy update." Simply put, a rate hike should not be expected this month. Currently, financial markets show a nearly 99% probability that the Fed will continue to hold off on increasing rates in November, as indicated by the CME FedWatch Tool.

The 10-year Treasury yield has been hovering around 5% in recent days, which is its highest level since 2007. This rate has an impact on consumer loans, such as mortgages and credit cards, and is contributing to the decline in consumer spending.

The Fed may not have to persistently increase rates in order to reduce spending and curb inflation. Inflation is gradually returning to a normal state. The US Consumer Price Index, which is a commonly employed indicator of inflation, has experienced a considerable slow down since its peak of over 9% in June 2022. However, there has been a recent uptick in inflation due to rising gas and food prices. Nevertheless, when excluding food and energy, the core CPI stands at 4.1%, which is the lowest annual growth rate in two years. Despite this, it still exceeds the Fed's desired target rate of 2%.

According to economists, inflation is no longer regarded as an urgent concern. As a result, the Federal Reserve is not under as much pressure to rapidly stabilize prices by implementing severe and economically burdensome interest rate hikes. Once inflation falls below 5%, it tends to fade from public attention, as people shift their focus to other pressing matters such as budget deficits, climate change, or other public concerns.

Some Walgreens pharmacy workers say they are planning another walkout

A nationwide walkout is being planned by pharmacy workers at Walgreens, one of the largest drugstore chains in the country, with hopes of generating broader participation. The protest is scheduled to take place at the end of October.

Workers have already initiated walkouts in various cities to express their dissatisfaction with working conditions that they believe jeopardize customer safety. These actions, which have occurred throughout the month, resulted in temporary closures of a few pharmacies and a decrease in business at several others. Walgreens stated to CNN that the overall impact has been minimal.

According to multiple pharmacy staff and organizers across different states, there are plans to organize another walkout and set up picket lines between October 30 and November 1. This protest aims to address concerns regarding inadequate staffing levels and other related issues.

Shane Jerominski, a former Walgreens pharmacist and one of the organizers of the walkouts, stated in an interview with CNN that he has collaborated with union representatives to organize demonstrations. These protests are scheduled to start the day before Halloween, a crucial period for pharmacy chains due to the rising demand for vaccinations during the cold and flu season.

When contacted by CNN, a spokesperson from the United Food and Commercial Workers International Union expressed their endorsement for the organizers of the walkout and protests. This support is also echoed by SEIU-United Healthcare Workers West.

The organizers expressed optimism that Walgreens will collaborate with them to address various issues, including understaffing, an increasing workload, and inadequate compensation. Walgreens responded to CNN, stating that only around 20 stores, out of their total of approximately 9,000, experienced "disruptions" between October 9-11. However, according to the organizers, the number of participating employees was much higher, estimated at about 600.

Walgreens recently appointed Tim Wentworth as its new CEO. During the company's Oct. 12 earnings call, Wentworth expressed appreciation for pharmacists but did not address the recent walkouts. Additionally, Walgreens announced its plans to reduce costs by $1 billion in the upcoming year. The company's shares have experienced a decline over the past year, dropping from $41 in November 2022 to approximately $21 at the end of last week.

In response to inquiries, Walgreens declined to comment on potential workforce disruptions but highlighted its ongoing efforts to recruit, retain, and reward its pharmacy staff, which have been a priority since the beginning of the pandemic.

Kim Kardashian is making Skims for men

Skims, the underwear and apparel brand founded by Kim Kardashian, is hoping to attract new customers: men.

The shapewear brand, which has been around for four years, is now venturing into the realm of men's clothing. Their new collection, set to be released on Thursday, features a variety of items such as briefs, undershirts, boxers, and leggings. The prices for these products range from $16 to $54, depending on the specific item. Additionally, the men's sizes will follow Skims' body positivity focus and will be available in sizes ranging from extra small to 5X.

This expansion into menswear could potentially serve as a precursor to an initial public offering (IPO) for the company. However, it is important to note that no official announcements regarding this matter have been made at this time.