Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman cast votes against the decision to hold the central bank's benchmark overnight interest rate unchanged in the 4.25%-4.50% range, preferring instead to reduce it by a quarter percentage point.
That marked the first time two members of the Washington-based Board of Governors formally dissented on a decision by the policy-setting Federal Open Market Committee since December 1993, according to data from the St. Louis Fed.
Any level of formal opposition by Fed governors is relatively rare, and most FOMC dissenting votes stem from disagreements held by regional Fed bank presidents. The last time a governor dissented was at the meeting last September, when 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.
Broadly speaking, dissenting votes on the FOMC are uncommon. Until Wednesday, no Fed meeting this year generated formal opposition, with only two dissents occurring in 2024 and none in 2023.
The latest dissents were not a surprise, as both Waller and Bowman had signaled ahead of the policy meeting their openness to easing rates. In a speech on July 17, Waller justified his desire to lower short-term borrowing costs when he said "the economy is still growing, but its momentum has slowed significantly, and the risks to the FOMC's employment mandate have increased."
Bowman, in remarks on June 23, brushed off worries that President Donald Trump's import tariffs would drive up inflation and said as long as inflation pressures remained contained, she believed then that "it was time to consider" lowering rates at the July 29-30 meeting.
Trump has excoriated Fed Chair Jerome Powell for failing to heed the White House's demands that interest rates be cut immediately. Both Waller and Bowman were appointed to the Fed's board by the current president.
DIVIDED VIEWS
In contrast to Waller and Bowman, most Fed policymakers have taken a wait-and-see approach to the economic and monetary policy outlook. While inflation pressures have eased, many officials are worried Trump's tariffs will drive up price pressures over time, which argues against easing policy.
Speaking in a press conference following the Fed meeting, Powell took the dissenting votes in stride.
"This was quite a good meeting all around the table," Powell said. "What you want from everybody, and also from a dissenter, is a clear explanation of what your thinking is and what are the arguments you're making," and "we had that today."
The central bank chief declined to say if the dissenters had nudged him toward supporting easier policy when officials next meet, saying "we haven't made any decisions about September. We'll be monitoring all the incoming data and asking ourselves whether the federal funds rate is in the right place."
Waller, who has been mentioned as a possible successor to Powell when the Fed chief's term expires next May, 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. He's become increasingly worried that the job market is stalling out and wants the Fed to ensure that doesn't happen.
Powell noted Waller's argument may have some merit. "A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level, but it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed."
Dissenting votes on the Fed's policy-setting committee are mostly notable for showing the breadth of debate among central bankers, and Fed officials have said they are a sign that policymakers are not mired in groupthink, as some critics contend. Dissents also tend to increase during challenging and uncertain points for the economy.
