Two Federal Reserve governors cast votes for interest rate decreases, marking the highest number of disagreements on this issue since 1993.
Fed Governors Dissent Against Steady Interest Rates, Advocate for Rate Cut
In a rare move, Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman of the Federal Reserve have dissented against the decision to keep interest rates steady. Both officials supported a 25-basis-point cut to the federal funds rate at recent meetings.
Their dissent comes as they believe the Fed should address signs of slowing economic growth and labor market fragility. Although inflation has moved closer to the Fed’s 2% target after excluding temporary tariff effects, they argue that a rate cut would proactively hedge against a further weakening in employment and economic activity.
Michelle Bowman specifically cited easing inflation risks and signs of weakness in the labor market as reasons for her stance. She envisions multiple rate cuts before the end of 2025 to stimulate growth and support maximum employment, a view she has held since late 2024.
Christopher Waller, on the other hand, dissented partly due to his concerns about slowing growth and hiring. He believes rate cuts are necessary to prevent a weaker economy and rising unemployment. Unlike some, his reasons are not influenced by political pressures, but rather by economic indicators.
This marks the largest number of dissenting votes by governors at the central bank in just over three decades. The last time two members of the Washington-based Board of Governors formally dissented was in December 1993.
Interest rates remained unchanged following a two-day policy meeting on Wednesday. However, this is noteworthy for showing the diversity of opinions among policymakers, and Fed officials have said it is a sign that policymakers are not mired in groupthink.
Both Waller and Bowman were appointed to the Fed’s board by the current president, and their openness to easing rates was signaled ahead of the policy meeting. Waller has become increasingly worried that the job market is stalling out and wants the Fed to ensure that doesn’t happen.
In her remarks on June 23, Bowman stated that she believed it was time to consider lowering rates at the July 29-30 meeting, brushing off worries that President Trump's import tariffs would drive up inflation. Waller, in a speech on July 17, stated that the economy is still growing but its momentum has slowed significantly, and the risks to the FOMC’s employment mandate have increased.
The last time a governor dissented was at the meeting last September, when Michelle Bowman wanted a smaller rate cut than her colleagues favored. The last time two regional Fed presidents voted against the FOMC consensus was in October 2019.
Dissenting votes on the Fed’s policy-setting committee are uncommon but are often more common during challenging and uncertain points for the economy. Waller has contended in a series of public remarks that any rise in inflation due to tariffs will be a one-time hit that can be ignored by central bankers.
This dissent from Waller and Bowman reflects concern that the Fed should move sooner to lower borrowing costs to support the economy. Their dissenting votes are a sign of the breadth of debate among central bankers and are a testament to the Fed's commitment to open and robust discussions on monetary policy.
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