Federal Reserve Governors Waller and Bowman dissent on interest rate decision, citing labor market concerns.

Federal Reserve Governors Christopher Waller and Michelle Bowman dissented against the Fed's decision to hold interest rates steady, citing concerns about labor market weakness. Waller emphasized the need for a quarter-point reduction to avoid unnecessary damage, while Bowman highlighted signs of labor market fragility. Their views differ from Chair Jerome Powell and other policymakers, who continue to support a patient approach.

Federal Reserve Governors Christopher Waller and Michelle Bowman have dissented against the Fed's decision to hold interest rates steady, citing growing concerns over labor market weakness. In separate statements released on Friday, both Waller and Bowman expressed their preference for a quarter-point reduction in interest rates, arguing that the current approach could lead to unnecessary damage to the labor market [1].

Waller, who emphasized the need for a more proactive policy, stated that the "wait and see" approach is overly cautious and does not adequately balance the risks to the outlook. He pointed to expected data revisions and stalled private-sector payroll growth as factors contributing to the downside risks [1]. Bowman, who serves as the Fed's vice chair for bank supervision, echoed these concerns, noting that the labor market has become less dynamic and shows increasing signs of fragility [1].

Their views contrast sharply with those of Chair Jerome Powell and other policymakers, who continue to describe the labor market as broadly solid and support a patient approach to adjusting rates. Powell and his colleagues have been cautious in their rate adjustments, aiming to gauge how President Donald Trump's tariff policies are impacting inflation and the economy [1].

Both Waller and Bowman did not advocate for the kind of dramatic cuts pushed by President Trump, who has criticized the Fed for not cutting rates more aggressively. Instead, they suggested more gradual cuts, with Waller proposing a reduction of up to 1.5 percentage points at a slow pace, and Bowman supporting "gradual cuts" as she noted that tariffs are having only a limited impact on prices [2].

The Fed's decision to hold interest rates steady was widely anticipated but also one of the most contentious in recent history, with two members of the board dissenting for the first time since 1993 [3]. The decision reflects a deepening divide among policymakers over the appropriate response to the economic challenges posed by tariffs and their potential impact on inflation and the labor market.

References:

[1] https://www.bloomberg.com/news/articles/2025-08-01/fed-s-waller-and-bowman-cite-labor-market-for-dissents
[2] https://www.cnbc.com/2025/08/01/fed-governors-bowman-waller-explain-their-dissents-say-waiting-to-cut-rates-threatens-economy.html
[3] https://www.nytimes.com/live/2025/07/30/business/federal-reserve-interest-rates/takeaways-from-the-fed-meeting