US President Donald Trump will speak next to Federal Reserve Chairman Jerome Powell on July 24, 2025, during a tour of the Federal Reserve Committee building currently under renovation in Washington, D.C.
Kent Nishimura | Reuters
The two Federal Reserve voted against holding key interest rates this week, explained the decision on Friday. Both show that central banks are making mistakes by waiting to ease policies amid increasing threats to the labour market.
Governors Christopher Waller and Michelle Bowman both said they wanted a quarter-point cut, as they believe tariffs will only have a temporary effect on inflation. They said that pending stays pose a risk to the economy, as the rate setting federal open market committee has been doing since December.
In separate statements, Waller and Bowman set the opposition reasons, the first time that two governors had since 1993. The committee voted 9-2, and the differences reflected “healthy and robust arguments,” Waller said.
“There is no problem with having different views on how incoming data is interpreted and using different economic arguments to predict how tariffs will affect the economy,” he wrote. “However, I believe that the approach to meetings and viewing is overly cautious and, in my opinion, it can lead to a policy falling behind the curve because it doesn’t properly balance the risks of the outlook.”
Waller further argued that the impact of President Donald Trump’s inflation from tariffs has been “smack so far” and that the flow can continue.
He and Bowman weren’t defending the dramatic cuts that Trump promoted. The president has proposed a federal funding rate that sets a target for banks to use overnight lending but will flow to many other rates, which should be 3 percentage points lower.
Waller suggested something more gradual – cutting 1.5 percent points at a slow pace to monitor the impact of mitigation of policies that the committee is monitoring.
Similarly, Bowman supported “sequential cuts.” She also said that tariffs have a limited impact on prices. In fact, she said, without obligation, the Fed’s main inflation measures would be below 2.5%, “very close to the 2% target.”
“It’s appropriate to look at temporarily rising inflation measures, as tariff-related price increases are likely to represent a one-off effect,” said Bowman, vice-chairman of the Fed’s banking supervision. “I think delaying action risks degrading the labour market and slowing economic growth even further.”
Trump has not mercilessly relentless to his criticism that the Fed will not cut. On the Truthful Social Post on Friday morning, he was torn apart by the central bank once again, especially Chairman Jerome Powell.
“The stubborn idiot Jerome “too late” Powell now has to cut interest rates significantly. If he continues to refuse, the board should assume control and do what everyone has to do! ” Trump said.
