Former Minneapolis Fed President Gary Stern Warns Against Further Rate Cuts Amid Market Uncertainty

This analysis is based on the CNBC interview [1] with former Minneapolis Fed president Gary Stern published on November 13, 2025, where he expressed skepticism about further interest rate reductions. Stern’s commentary carries significant weight given his 24-year tenure as Minneapolis Fed president (1985-2009), making him the longest-serving president in the bank’s history [2].

The Federal Reserve has implemented two consecutive 25-basis point rate cuts in September and October 2025, bringing the federal funds rate to a target range of 3.75%-4.00% [3]. However, inflation remains elevated at 3.0% as of September 2025, still above the Fed’s 2% target [3]. This creates a challenging policy environment where the Fed must balance economic support against inflation concerns.

Stern’s comments coincided with significant market weakness on November 13, 2025. The S&P 500 fell 0.87% to 6,766.93, the NASDAQ declined 1.35% to 22,948.93, and the Dow Jones dropped 0.83% to 47,775.67 [0]. Technology stocks were particularly affected, suggesting heightened sensitivity to monetary policy expectations. The Russell 2000 experienced the steepest decline at -1.88%, indicating broader market concerns [0].

Stern’s caution against further rate cuts aligns with several economic realities:

1. Inflation Persistence
   : With inflation at 3.0%, there’s limited room for additional easing without risking inflation resurgence [3]
2. Policy Lag Effects
   : Recent rate cuts may not have fully transmitted through the economy yet
3. Government Shutdown Impact
   : The U.S. government shutdown has created data gaps, forcing Fed policymakers to rely on anecdotal reports and private sources for economic assessment [3]

The next FOMC meeting is scheduled for December 9-10, 2025, where Stern’s perspective may influence deliberations among regional Fed presidents [3].

• Global Monetary Policy Coordination
  : Other major central banks are maintaining current rates (ECB at 2.00%, BOE at 4.00%, BOJ at 0.50%), suggesting a global consensus on monetary policy caution [3]
• Investor Sentiment Shift
  : Recent AAII survey data shows rising bearish sentiment among investors, indicating growing market caution that aligns with Stern’s policy stance [4]
• Small-Cap Vulnerability
  : The Russell 2000’s outperformance in losses (-1.88%) suggests smaller companies may be more vulnerable to higher-for-longer rate expectations [0]

Stern’s extensive experience through multiple economic cycles, including periods of high inflation and financial crises, provides valuable context for his current assessment [2]. His tenure spanned critical periods including the 1987 market crash, the 1990s recession, and the 2008 financial crisis, giving him unique insight into policy trade-offs.

The government shutdown has created significant data limitations, with key employment and inflation reports potentially delayed or unavailable [4]. This information vacuum increases the importance of experienced perspectives like Stern’s, though it also complicates policy decision-making.

• Policy Misalignment
  : Markets may be pricing in more rate cuts than economic fundamentals justify, creating potential for sharp adjustments if the Fed maintains current policy
• Data Deficiency Impact
  : The ongoing government shutdown limits policymakers’ access to reliable economic data, increasing the risk of policy errors [3]
• Inflation Resurgence
  : Additional rate cuts could reignite inflationary pressures, particularly given the current 3.0% rate [3]

• Policy Clarity
  : Stern’s comments may help align market expectations with likely Fed policy, reducing uncertainty
• Strategic Positioning
  : The current environment may favor sectors less sensitive to interest rates, such as consumer staples or healthcare
• Long-Term Planning
  : A higher-for-longer rate environment could support more sustainable investment decisions

With the December FOMC meeting approaching, the next few weeks are critical for policy direction. The impact of recent rate cuts needs time to fully materialize, supporting Stern’s wait-and-see approach.

• Current federal funds rate: 3.75%-4.00% (after September and October 2025 cuts) [3]
• Inflation rate: 3.0% (September 2025) [3]
• Market performance on November 13, 2025: S&P 500 -0.87%, NASDAQ -1.35%, Dow Jones -0.83% [0]
• Next FOMC meeting: December 9-10, 2025 [3]

Gary Stern’s assertion that it’s “difficult to build rationale to lower rates at this point” reflects a cautious monetary policy stance supported by persistent inflation above target levels and potential data limitations due to the government shutdown [1, 3]. His perspective, backed by extensive Fed experience, suggests the current easing cycle may be approaching its conclusion despite market hopes for additional accommodation.

The negative market response to Stern’s comments indicates investor sensitivity to monetary policy expectations. Technology and small-cap stocks showed particular weakness, suggesting sectors most sensitive to borrowing costs may face continued pressure if rates remain higher for longer [0].