Rare Fed Dissent Looms as Waller and Bowman Push for Rate Cuts

For the first time in over three decades, the Federal Reserve may see a rare Fed dissent among its board governors. Such internal divisions are uncommon and often signal more profound shifts in monetary policy thinking—something financial markets closely watch.

A Potential Double Dissent

The upcoming July 29-30 Federal Open Market Committee (FOMC) meeting could mark the first time since 1993 that two Fed governors vote against the consensus at the same meeting. Fed Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman—both appointed by former President Donald Trump—have publicly expressed their support for an interest rate cut. However, markets overwhelmingly expect the committee to keep the federal-funds rate steady in the 4.25% to 4.5% range.

Should Waller and Bowman break ranks, this rare Fed dissent would not only underscore growing frustration among the central bank’s dovish members but could also foreshadow a shift in the Fed’s policy stance ahead of the next FOMC meeting in September.

Powell’s Balancing Act

Fed Chair Jerome Powell remains cautious, insisting that inflation must show a sustained move toward the 2% target before rate cuts can be considered. Recent inflation data, which rose to 2.7% in June, partly due to tariffs, has reinforced the committee’s cautious approach. Futures markets are pricing in just over a 60% chance of a quarter-point cut in September, but virtually no chance of a July cut.

Waller and Bowman argue that waiting could backfire. Waller believes tariff-driven inflation is temporary and cites weakening consumer spending and labor demand as reasons to cut now. Bowman has echoed these concerns, emphasizing the need to prepare for a softer economic outlook.

Historical Context of Dissent

The last time two Fed governors dissented simultaneously was in December 1993, under Alan Greenspan, when Wayne Angell and Lawrence Lindsey opposed a policy bias toward looser monetary conditions. In Powell’s tenure, dissent has been rare—only about 3% of decisions have seen a governor break from the consensus.

Political and Institutional Pressure

The tension surrounding the Fed isn’t limited to internal debates. Former President Trump has repeatedly criticized Powell for keeping rates too high and has even floated the idea of removing him, citing a $2.5 billion renovation of the Fed’s headquarters as evidence of mismanagement. Although legal experts suggest firing Powell would be difficult, the mere suggestion has shaken investor confidence.

Outside voices have added to the pressure. Notably, economist Mohamed El-Erian has called for Powell’s resignation to protect the Fed’s independence, while Treasury Secretary Scott Bessent has hinted at broader institutional reforms.

Why This Matters for Markets

The July meeting is about more than just interest rates. It’s a test of Powell’s ability to maintain consensus within the Fed, fend off political influence, and signal a clear path for monetary policy. A rare Fed dissent could spark market speculation that a rate cut is imminent, or that internal divisions are becoming too pronounced to ignore.

As Powell approaches the Fed’s Jackson Hole symposium—his final one as chair—the stakes are high. Whether the Fed holds rates or shifts policy, markets will interpret every signal as either a sign of resilience or a reaction to mounting political and economic pressure.