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Fed Keeps Rates High: Cuts Unlikely in Current Economic Climate

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  Published in Stocks and Investing on Friday, November 14th 2025 at 15:13 GMT by Seeking Alpha

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Interest‑Rate Cuts May Be Unnecessary Under Current Conditions – A Summary of Richard Bernstein’s Seeking Alpha Analysis

On June 12 2025, finance columnist and macro‑economist Richard Bernstein published a thoughtful commentary on Seeking Alpha titled “Interest‑Rate Cuts May Be Unnecessary Under Current Conditions.” In the piece, Bernstein argues that the Federal Reserve’s policy stance, coupled with recent economic data, indicates that the central bank is unlikely to be compelled to cut rates in the near term. Below, we distill his main points, weave in contextual links to other Seeking Alpha coverage, and synthesize the broader implications for investors and policy watchers.

1. The Fed’s “Sufficient” Rate Range

Bernstein opens by reviewing the Fed’s policy rate corridor—currently 5.25% to 5.50%—and noting that the last two rate hikes (April and June 2024) have been decisive. He points out that the Fed’s “policy rate” remains high relative to the inflation target of 2% and that the forward‑guidance from the most recent FOMC meeting stresses a willingness to keep the range tight “until more robust evidence of sustained inflation control emerges.” Bernstein explicitly cites the Fed’s policy rate article on Seeking Alpha for readers who want a more granular view of the historical trajectory of the federal funds target.

Key takeaway: The current rate range is high enough that additional cuts would be “counter‑intuitive” given the Fed’s stated objective of “full employment and price stability.”

2. Inflation Dynamics – The “Cooling” Argument

Bernstein then delves into the latest CPI and PCE releases. He highlights that:

• The PCE price index (the Fed’s preferred gauge) cooled to 3.3% YoY in May 2025—down from 3.6% in April and 3.9% in March.
• Core inflation (excluding food and energy) has also fallen to 2.9% from 3.2% in the previous month.
• The inflation expectations as reflected in the 5‑year breakeven rate have eased, now sitting at 2.8%—a 4‑month low.

Bernstein links to Seeking Alpha’s “U.S. Inflation Data – A Closer Look” article, which provides a month‑by‑month breakdown and discusses how supply‑side disruptions have eased.

He concludes that inflation is moving toward the Fed’s target range without any abrupt resurgence in headline prices. Consequently, the policy environment appears “well‑positioned” to maintain rates, at least for the next cycle.

3. Labor Market Resilience – “No Labor Shock”

A major concern for monetary policy is the labor market. Bernstein cites the Bureau of Labor Statistics data that:

• Unemployment sits at 3.8%, unchanged from the last quarter.
• The participation rate is at 63.5%, a 1‑point lift from April.
• Wage growth has slowed to 4.2% from 4.6%, indicating a tightening of the “wage‑price” spiral.

Bernstein notes that the non‑farm payroll number—226,000 new jobs in May—remains robust. He also references the Seeking Alpha piece “US Labor Market Outlook 2025: What Investors Should Watch,” which discusses how the labor market is still “too tight” for the Fed to consider cuts without risking a rebound in wages and, consequently, inflation.

4. Credit Conditions and the “Credit Channel”

Another pillar of Bernstein’s argument is that credit conditions remain fairly tight. He refers to the Fed’s “Credit Conditions Gauge” and points out that the credit‑to‑GDP ratio has increased slightly, suggesting that borrowing costs are not at the low end of the spectrum. The US Treasury bond market remains calm, with the 10‑year yield hovering around 4.1%—the highest level since early 2020.

Bernstein links to the “US Treasury Yields – A Historical Perspective” article for readers who wish to see how the current 10‑year yield compares with previous high‑rate cycles. He argues that, because the credit market is still constrained, the Fed has less incentive to loosen policy.

5. The “Risk of Recession” and the “Uncertainty” Argument

The next section is where Bernstein turns to the classic “rate‑cut‑vs‑recession” debate. He outlines the “Recession Indicator” framework, highlighting that:

• The leading economic index (LEI) is negative for the first time since February 2023.
• The yield curve—although inverted for the past two months—has shown some flattening in the 2‑10 year spread, which analysts sometimes interpret as a “softening” of the recession signal.

Nevertheless, Bernstein maintains that the macro data are still too weak for the Fed to consider a cut. He cites a Seeking Alpha editorial titled “Is the Fed on the Brink of a Rate Cut?” that presents the alternative view. Bernstein uses this to illustrate that his stance is not “monolithic” but rather a synthesis of divergent market narratives.

6. Conclusion – “The Fed Will Likely Stay the Course”

Bernstein closes by reiterating that the current economic environment is a “tight but safe” one for the Fed. The combination of cooling inflation, strong labor markets, and constrained credit conditions creates a setting in which rate cuts are both unnecessary and potentially risky.

He warns that investors who anticipate a rate cut should adjust expectations—particularly in bond markets, as yield curves may not flatten as sharply as some forecast. He advises that the equities sector, especially consumer‑discretionary and financials, remain sensitive to the Fed’s policy trajectory.

Key Takeaways for Investors

Further Reading (Suggested by Bernstein)

1. Seeking Alpha – “Fed’s Policy Rate: A Comprehensive Overview” – For a deep dive into the historical path of the federal funds target.
2. Seeking Alpha – “US Inflation Data – A Closer Look” – Detailed month‑by‑month CPI and PCE analysis.
3. Seeking Alpha – “US Labor Market Outlook 2025: What Investors Should Watch” – Insights into the labor market’s influence on monetary policy.
4. Seeking Alpha – “US Treasury Yields – A Historical Perspective” – Context for current bond yields.
5. Seeking Alpha – “Is the Fed on the Brink of a Rate Cut?” – Contrasting viewpoints on future policy moves.

In sum, Richard Bernstein’s article argues that interest‑rate cuts are unlikely under the present economic snapshot. By anchoring his reasoning in current data and supplementing with cross‑linked Seeking Alpha resources, Bernstein offers a clear, data‑driven narrative that helps investors and policy analysts alike to navigate the evolving monetary policy landscape.