Federal Reserve governors Wall and Bowman oppose maintaining interest rates: warning of increasing risks in labor market shift

Federal Reserve Governors Christopher Waller and Michelle Bowman expressed concerns about the central bank's reluctance to cut interest rates, which could potentially cause unnecessary harm to the labor market. Waller and Bowman both voted against the Fed's decision to keep the benchmark interest rate unchanged for the fifth consecutive time this week, both in favor of a 25 basis point cut. In a separate statement released on Friday, they explained their dissenting views, both emphasizing signs of a weakening labor market. Their views differ from Fed Chair Jerome Powell and other policymakers, who continue to describe the labor market as overall strong and support a patient approach to adjusting interest rates in order for officials to continue assessing the impact of President Donald Trump's tariff policies on inflation and the economy. "I think a wait-and-see approach is being too cautious, in my view, it does not appropriately balance risks to the outlook and could lead to policies lagging behind developments," Waller said in his statement. He stated that given anticipated data revisions and stagnant private sector wage growth, the downside risks to the labor market have increased. Bowman, in her statement, stated, "The vibrancy of the labor market has waned and shows increasingly delicate signs." Trump has been pressuring the Fed to cut interest rates, responding to these statements on social media, saying, "There is strong dissent within the Federal Reserve Committee. This voice will only get louder!" Earlier on Friday, he urged other members of the Fed's Board of Governors that if Powell continues to lean towards keeping rates unchanged, they should "take control." Waller and Bowman's statements come shortly before the release of the latest government employment report, expected to show a slowdown in job growth and an increase in the unemployment rate. Both were appointed by Trump. Tariff impact Powell has previously stated that he expects inflation data over the next few months to begin showing a greater impact from tariffs, and officials must ensure that tariffs do not lead to sustained inflation. Waller stated in his statement that the impact of tariffs on prices has been minimal so far. "Given that we may likely not have clarity on the level of tariffs or their ultimate impact on the economy in the months ahead, the labor market may deteriorate before we get clear information - if we ever get clear information." He stated, "When labor markets turn, they often turn quickly," adding that officials can start lowering policy rates and continue to assess changes in data. Similarly, Bowman stated that she believes "delaying action could pose risks of labor market deterioration and further slowing economic growth." "Given soft overall demand as inflation continues to move towards the 2% target, and signs of a weakening labor market, I believe we should pay more attention to the risks of employment tasks," she added.