WASHINGTON – Michael Feroli, an economist at JPMorgan Chase, recently commented on the rare dissent by Federal Reserve Governors Christopher Waller and Michelle Bowman, suggesting their votes against the majority decision to hold interest rates might be influenced by future leadership considerations. This observation comes after the Federal Reserve opted to keep its key short-term interest rate unchanged for the fifth consecutive time this year.
The Federal Reserve’s latest decision saw nine officials, including Chair Jerome Powell, vote to maintain current borrowing costs, while Governors Waller and Bowman favored a reduction. This 9-2 split marks the first instance in over three decades that two of the seven Washington-based governors have dissented on a policy decision. The unusual division highlights emerging differences within the central bank's leadership.
Feroli, in a note to clients, stated that if the pair were to dissent, "it would say more about auditioning for the Fed chair appointment than about economic conditions." This remark points to the upcoming end of Chair Powell’s term in May 2026, with Waller, in particular, frequently mentioned as a potential candidate for the top position. The timing of the dissent has thus drawn attention to internal dynamics within the Fed.
Governor Bowman's previous dissent occurred in September 2024, when she preferred a quarter-point rate cut over the half-point reduction implemented, citing inflation still above 2.5%. Conversely, Governor Waller has advocated for rate cuts due to concerns about slowing growth and hiring, aiming to prevent a rise in unemployment. Their differing rationales underscore the complexity of current economic assessments within the Fed.
The public dissent and Feroli's interpretation add a layer of political speculation to the Federal Reserve's monetary policy discussions. Such internal divisions, especially from potential future leaders, could be closely watched by markets and policymakers for insights into the future direction of the central bank's strategy and leadership.