A rare public fracture has emerged at the Federal Reserve after two of its governors dissented from the central bank’s decision this week to leave interest rates unchanged, calling instead for an immediate cut. The lack of unanimity is the first of its kind in over three decades and signals growing internal division on the future path of monetary policy.
While the Fed’s move to hold rates steady was widely anticipated, the surprise came from Governors Christopher Waller and Michelle Bowman—both appointees of President Donald Trump. They broke from the majority opinion, arguing for a quarter-basis point reduction in borrowing costs. Their reasoning centered on what they see as “broader signs of slackening in the labor market.”
The internal dissent coincides with a period of intensifying external pressure on the Fed, led by President Trump. The President has repeatedly and publicly demanded that the central bank lower rates to stimulate the economy, even making a direct plea to Fed Chair Jerome Powell at an event just before the policy meeting.
Despite the pressure from both within and outside the institution, Chair Powell remained steadfast in his cautious approach. In a press conference following the decision, Powell argued that it was prudent to wait for more clarity on the economic effects of the administration’s aggressive trade agenda. He stated it was “too soon to say” if a rate cut would be necessary at the Fed’s next meeting in September, adding that current policy is “modestly restrictive” but not actively holding back the wider economy.
Analysts note that the split highlights a significant challenge for Powell’s leadership. A note from BofA Securities observed that while dissents “are not necessarily a problem,” they “increase internal pressure at a time when there is significant external pressure to cut rates.” The analysts, led by Stephen Juneau, concluded that “multiple factions” are now emerging on the rate-setting Federal Open Market Committee.
