Federal Reserve Governors Christopher Waller and Michelle Bowman, who voted this week against keeping a key interest rate locked in place, said Friday they believe the central bank is making a mistake with its wait-and-see decision, considering rising threats to the nation’s labor market.
Waller and Bowman, both appointees of President Donald Trump, said they are calling for a reduction of a quarter point in the interest rates, as they think tariffs that the president is imposing will only impact inflation temporarily, reports CNBC.
The rate-setting Federal Open Market Committee has kept the key interest rate on hold since December, and Waller and Bowman, in separate statements, said that is posing risks to the national economy.
This week, the committee voted 9-2 to keep its benchmark overnight interest rate steady in the 4.25%-4.50% range for the fifth consecutive meeting, with Waller and Bowman becoming the first dissenting governors to cast dissenting votes since 1993.
Waller said the differences in opinion reflect a “healthy and robust discussion.”
“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,” he said in his statement. “But I believe that the wait and see approach is overly cautious and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve.”
Waller added that Trump’s tariffs have resulted in an impact that is “small so far” and may continue that way.
Trump has called for a drastic cut in interest rates by as much as 3 percentage points, but Waller said that he advocated a more gradual cut of as much as 1.5 percentage points to be rolled out while the committee monitors their impact.
Bowman said she also backs gradual cuts and agreed that tariffs are having a limited impact on prices.
She added that without the tariffs, the key inflation measure would now be below 2.5%, and “considerably closer to our 2% target.”
Bowman, who serves as the Fed’s vice chair for bank supervision, added that prices related to tariffs will likely represent a one-time effect, so it “is appropriate to look through temporarily elevated inflation readings.”
But delaying action could “result in a deterioration in the labor market and a further slowing in economic growth,” she said.
Trump has been tearing into the Fed and Chairman Jerome Powell, who he derides with the nickname of “Too Late” and on Friday called a “moron.”
Trump added on his Truth Social post that the Fed’s board must assume control of it if Powell continues to refuse to lower interest rates.
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