Fed Divides Deepen as Waller and Bowman Push for Rate Cut Amid Labor Market Concerns

Major divisions have emerged within the US Federal Reserve as two board members, Christopher Waller and Michelle Bowman, publicly expressed their disagreement with the decision to keep interest rates unchanged for the fifth consecutive year. Both argued that the central bank should have cut rates by 25 basis points to respond to a weakening labor market. They criticized the Fed’s “wait-and-see” strategy as overly cautious, warning that it could exacerbate labor market challenges and limit economic flexibility [1].

Waller emphasized the need for a more balanced approach to the risks facing the economy, stating that the Fed’s current stance risks becoming unresponsive to key developments. He specifically highlighted stalled growth in private sector employment and potential downward revisions in future economic data as signs of increasing downside risk [1]. Similarly, Bowman noted that the labor market’s vitality is declining, with “signs of fragility” becoming more apparent. She urged the Fed to adopt a bolder approach to interest rate policy to counter these trends [1].

In contrast, Fed Chair Jerome Powell and the majority of policymakers maintain that the labor market remains resilient and that additional data should be collected before any rate cuts are considered. This divergence in views highlights growing internal debate over the Fed’s policy direction at a critical juncture in the economic cycle [1].

The disagreement has drawn attention from external observers, including Donald Trump, who noted the growing rift and predicted it would intensify. “There is a strong disagreement within the Fed Board of Governors, and it will only get worse,” Trump stated, underscoring the high stakes of the policy debate [1].

As the Fed moves forward, the balance between cautious monitoring and proactive intervention remains a key question for policymakers and market participants alike. The outcome of this internal discussion could have significant implications for the broader economic landscape.

Source: [1] Major Split Within the Fed – Two Members Begin to Oppose Chair Jerome Powell, Here Are Their Statements (https://coinmarketcap.com/community/articles/688ce0ec56fa0c4c04dd316b/)