U.S. President Donald Trump speaks next to Federal Reserve Chair Jerome Powell during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington, D.C., U.S., July 24, 2025.
Kent Nishimura | Reuters
Two Federal Reserve officials who voted this week against holding a key interest rate in place explained their decisions Friday, both indicating that the central bank is making a mistake by waiting to ease policy amid rising threats to the labor market.
Governors Christopher Waller and Michelle Bowman both said they wanted a quarter percentage point reduction, as they see tariffs having only a temporary impact on inflation. They said staying on hold, as the rate-setting Federal Open Market Committee has done since December, poses risks to the economy.
In separate statements, Waller and Bowman laid out their reasons for dissenting, the first time two governors have done since 1993. The committee voted 9-2 to hold, and the differences of opinion reflect “a healthy and robust discussion,” Waller said.
“There is nothing wrong about having different views about how to interpret incoming data and using different economic arguments to predict how tariffs will impact the economy,” he wrote. “But, I believe that the wait and see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve.”
Further, Waller insisted that inflation impacts from President Donald Trump’s tariffs have been “small so far” and could continue in that vein.
Both he and Bowman did not advocate for the kind of dramatic cuts Trump has pushed. The president has suggested the federal funds rate, which sets a target that banks use for overnight lending but spills over into many other rates, should be as much as 3 percentage points lower.
Waller suggested something more gradual — cutting by as much as 1.5 percentage points, at a slow pace as the committee monitors impacts from policy easing.
Similarly, Bowman backed “gradual cuts” as she also said tariffs are having only limited impact on prices. In fact, she said that without the duties, the Fed’s key inflation measure would be below 2.5% “and considerably closer to our 2 percent target.”
“With tariff-related price increases likely representing a one-time effect, it is appropriate to look through temporarily elevated inflation readings,” said Bowman, who also serves as the Fed’s vice chair for bank supervision. “I see the risk that a delay in taking action could result in a deterioration in the labor market and a further slowing in economic growth.”
Trump has been unrelenting in his criticism of the Fed for not cutting. In a Truth Social post Friday morning, he again tore into the central bank, and Chair Jerome Powell in particular.
“Jerome ‘Too Late’ Powell, a stubborn MORON, must substantially lower interest rates, NOW. IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!” Trump said.
