The Federal Reserve’s decision this week to keep interest rates steady for a fifth-straight meeting faced the first double dissent from members of its powerful Board of Governors since 1993.
On Friday, the two officials who cast the opposing votes, preferring instead to cut rates in July, argued that an unsteady labor market called for the central bank to take pre-emptive action to support it. Christopher J. Waller and Michelle W. Bowman also said that inflationary pressures tied to President Trump’s tariffs were likely to be temporary, allowing the Fed to look through the expected jump in consumer prices.
“With underlying inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” Mr. Waller said in a statement. He is seen as a potential contender to replace Jerome H. Powell when his term as chair ends in May. “When labor markets turn, they often turn fast,” he added. “If we find ourselves needing to support the economy, waiting may unduly delay moving toward appropriate policy.”
That point was echoed by Ms. Bowman, who was nominated by Mr. Trump this year to become vice-chair for supervision. She said that cutting in July would have “proactively hedged against a further weakening in the economy and the risk of damage to the labor market.”
She also warned that waiting too long to cut could force the Fed to take much more aggressive action later to support the economy.
The dissents from Mr. Waller and Ms. Bowman were by no means a surprise. In the weeks leading up to the July policy meeting, both policymakers — appointed by Mr. Trump in his first term — had made a case for cutting rates.
But their objections come at a highly sensitive moment for the institution and Mr. Powell given the immense pressure from the White House to lower borrowing costs.
On Friday, Mr. Trump escalated his attacks on Mr. Powell, calling on the Fed’s board to unseat the current chair if the central bank does not cut interest rates.
“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!,” he wrote on social media.
Mr. Powell has borne the brunt of Mr. Trump’s criticism, which has spanned from his handling of the economy to his management of the institution and renovations underway at its headquarters in Washington.
Friday’s attacks came on the heels of a similar barrage on Thursday in which the president said Mr. Powell was “TOO ANGRY, TOO STUPID, & TOO POLITICAL, to have the job of Fed Chair.”
Mr. Trump once again accused Mr. Powell of costing the country “trillions of dollars” by making payments on the debt more expensive by not lowering interest rates. The Fed is mandated by Congress to set interest rates in a way that keeps inflation low and stable and fosters a healthy labor market. When asked on Wednesday at a news conference after the policy announcement about whether it also considered debt servicing costs, Mr. Powell said it was “just not something we take into consideration.”
“No advanced economy central bank does that, and if we did do that, it wouldn’t be good neither for our credibility nor for the credibility of U.S. fiscal policy,” the Fed chair added.
Mr. Trump this week also laid into Mr. Powell for his management of a sprawling project to renovate the central bank’s headquarters in Washington, which is running around $700 million over budget and set to cost roughly $2.5 billion. He called it “one of the most incompetent, or corrupt, renovations of a building(s) in the history of construction!”
The president last week visited the active construction site and was toured around by Mr. Powell, with the two at one point openly sparring over the total costs.
Amid this criticism, Mr. Powell dismissed that the divisions within the top ranks of the Fed were problematic. Mr. Powell on Wednesday described it as “quite a good meeting all around the table where people thought carefully about this and put their positions out there.”
In their statements on Friday, Mr. Waller and Ms. Bowman also sought to downplay the degree of disagreement across the Fed.
“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. These differences are a sign of a healthy and robust policy discussion,” said Mr. Waller. Ms. Bowman said she remained “committed to working together” with the rest of the officials at the Fed to set monetary policy appropriately for the economy.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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