Federal Reserve sees first double dissent since 1993 as two officials vote for rate cut

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) saw its first double dissent since 1993. While the FOMC decided to keep interest rates unchanged at 4.25 percent to 4.5 percent in the July 29-30 meeting, two members were of the opinion that the rate should be trimmed by 25 basis points.

Top Federal Reserve officials, Vice Chair for Supervision Michelle W. Bowman and Governor Christopher J. Waller, voted for a rate cut, while 9 other members, including Federal Reserve Chair Jerome Powell, voted to keep the key lending rate steady.

The marks the first time that two of the seven Federal Reserve governors have dissented from the majority’s decision in over three decades. Experts were expecting the governors to dissent ahead of the FOMC meeting, as both Waller and Bowman had been outspoken on their opinion regarding the interest rate cuts.

“Private-sector payroll growth is near stall speed,” Christopher J. Waller said earlier. “We should not wait until the labor market deteriorates before we cut the policy rate.”

Further, two weeks ago, Waller said, “I believe we should cut the policy rate at our meeting.” According to him, the Federal Funds rate should be three percent, which clocks in 125-150 basis points under the current rate.

Christopher Waller and Michelle Bowman were both appointed to the Federal Reserve Board during Donald Trump’s first  presidency.

Waller joined the Board in late 2020, near the end of Trump’s term. Before that, he served at the Federal Reserve Bank of St. Louis from 2009 and held academic positions earlier in his career. Bowman became a Fed governor in 2018 and was reappointed in early 2020. Her background includes roles as a banking executive and a state financial regulator in Kansas.

According to experts, both Bowman and Waller are on Trump’s short-list to replace Chair Powell after his term ends in May 2026. However, in his post-meeting speech, Powell suggested that having an independent central bank is been an institutional arrangement that has served the public well.

He added that what gives central banks the ability to make challenging decisions, is the focus on the data and the evolving outlook, not political factors. “If you were not to have that, that would be a great temptation, to use interest rates to affect elections, for example. 
And that’s something that we don’t want to do.”

Regarding the outlook for the year, even the Federal Open Market Committee sees significant division in the rate cut trajectory for 2025. According to the latest Summary of Economic Projections, seven FOMC foresee no cuts for the year, while eight are pencilling in two cuts of 25 basis points each.

Accordingly, the CME Group’s FedWatch tool noted that 65 percent expect a 25 basis points cut in the September meeting, while 34 percent expect to see no cuts in the meeting. Only one percent of participants expect a cut of 50 basis points in September.

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