In a dissent not seen in three decades, two Fed governors wanted to cut interest rates and here is why

Federal Reserve Governors Michelle Bowman and Christopher Waller on Friday released statements outlining why they supported an interest rate cut at this week's meeting. It marked the first time in more than 30 years that two Fed governors dissented from a decision about rates. The last time was in 1993.

Bowman and Waller on Wednesday dissented from the Federal Open Market Committee's (FOMC) 9-2 vote to hold the Fed's benchmark federal funds rate at a range of 4.25% to 4.5%, with both saying they would've supported a 25-basis-point cut to the key interest rate.

Dissents by FOMC members occur periodically, and the most recent dissent came from Bowman in September 2024, when she argued the Fed should have cut interest rates by just 25-basis-points instead of the 50-basis-point cut that policymakers voted to proceed with.

Bowman said in her latest dissent that the Fed should have cut rates and wrote, "Inflation has moved considerably closer to our target, after excluding temporary effects from tariffs, and the labor market remains near full employment."

"With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting. In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market," Bowman explained.

She went on to say that she has gained "even greater confidence that tariffs will not present a persistent shock to inflation," which warrants more focus on risks to the employment side of the Fed's dual mandate.

Waller explained in his dissent that central banks should "look through" tariffs as "one-off increases in the price level" that "do not cause inflation beyond a temporary increase."

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