Fed Governors Bowman and Waller Dissent, Warn Delaying Rate Cuts Risks Economic Harm
Washington, D.C. – August 1, 2025
In a rare break from consensus, Federal Reserve Governors Christopher Waller and Michelle Bowman dissented against the Federal Open Market Committee’s (FOMC) decision to maintain the federal funds rate at 4.25%-4.50% during its July 30-31 meeting, marking the first dual governor dissent since 1993. The 9-2 vote to hold rates steady for the fifth consecutive meeting prompted both officials to issue statements on Friday, arguing that delaying interest rate cuts could jeopardize the U.S. economy, particularly the labor market.
Waller and Bowman, both appointed by President Donald Trump, advocated for a quarter-percentage-point cut, citing concerns over a cooling labor market and the limited inflationary impact of Trump’s tariffs. Waller emphasized that the labor market is showing signs of fragility, with private-sector job growth slowing significantly—only 73,000 jobs were added in July, per the latest nonfarm payroll report, with May and June figures revised downward by a combined 258,000. “When labor markets turn, they often turn fast,” Waller warned, arguing that the Fed’s “wait-and-see approach is overly cautious” and risks policy falling “behind the curve.” He suggested the current rate, 1.25-1.50 percentage points above the estimated neutral rate of 3%, should be gradually lowered by up to 1.5 points to support economic stability.
Bowman echoed these concerns, highlighting “a less dynamic labor market” and signs of economic slowdown, with U.S. growth averaging just 1.2% in the first half of 2025 after a 3% rebound in Q2 offset by a 0.5% contraction in Q1. She argued that a July cut would have proactively hedged against further economic weakening, noting that tariff-related price increases are likely one-time effects rather than sustained inflation drivers. “Delaying action could result in a deterioration in the labor market and further slowing in economic growth,” she said, advocating for gradual reductions to move policy toward a neutral stance.
The dissents come amid heightened political pressure from President Trump, who has repeatedly criticized Fed Chair Jerome Powell, calling him “too late” and demanding immediate rate cuts of up to 3 percentage points. Both governors distanced themselves from Trump’s aggressive stance, with Waller explicitly stating his views were not politically motivated. Their statements emphasized that tariffs have had a “small” impact on inflation so far, with June’s personal consumption expenditures price index at 2.6%, above the Fed’s 2% target but not indicative of runaway inflation.
The FOMC’s majority, led by Powell, remains cautious, citing uncertainty over whether tariffs will cause temporary or persistent inflation. Powell noted that the economy’s solid performance—despite moderated growth—allows the Fed to monitor incoming data, with key inflation and jobs reports expected before the September meeting. However, the dissents signal a growing divide within the Fed, with some economists suggesting Waller and Bowman’s votes reflect strategic positioning, as both are seen as potential successors to Powell, whose term ends in May 2026.
Critics, including JPMorgan Chase economist Michael Feroli, downplayed the dissents’ immediate policy implications, suggesting they may reflect “auditioning for the Fed chair appointment” rather than a seismic shift in monetary policy. Others, like Nationwide’s Kathy Bostjancic, argue that a September rate cut remains possible if economic moderation outweighs tariff concerns. For now, Waller and Bowman’s public push for action underscores a critical debate: whether the Fed’s caution risks tipping the economy into a deeper slowdown.
By James Carter, Economic Correspondent