Powell faces unprecedented pressure! Two Fed officials may oppose interest rate decision at July meeting.

The Federal Reserve is expected to hold a new round of monetary policy meetings on July 29-30, and the market widely expects the federal funds rate to remain unchanged in the target range of 4.25% to 4.5%. However, this meeting may see two Federal Reserve governors casting dissenting votes for the first time since 1993, showing internal divisions on whether to cut interest rates intensifying. The two officials drawing attention are Vice Chairman Bowman, responsible for supervisory affairs, and Governor Waller, both of whom were nominated to the Federal Reserve Board during the Trump administration. They have previously publicly supported taking action to cut interest rates at the July meeting. If the committee maintains rates as expected and both of them continue to vote in favor of a rate cut, this will mark the first time in 32 years that "two governors dissented," which will have far-reaching effects on market confidence and policy direction. It is widely believed that if Bowman and Waller cast dissenting votes, it may not only be a one-time protest, but could also signal a shift towards more dovish policies within the FOMC, laying the groundwork for a policy shift in the next meeting on September 16-17. Waller's reasons for advocating a rate cut include continued slowdown in consumer spending, significant cooling in the labor market, and the temporary nature of inflation push caused by the Trump administration's imposition of new tariffs. He believes that "waiting itself is a risk." Bowman has recently also publicly supported his views, stating that if inflation continues to fall, "it is time to seriously consider cutting interest rates." Currently, federal funds futures show little hope of a rate cut at the July meeting, with the market giving a 60% chance of a 25 basis point rate cut at the September meeting. The rise in June's U.S. CPI to 2.7%, partly driven by the Trump administration's tariff policies, is one of the important reasons why the Fed is holding steady. This potential dissent undoubtedly intensifies the test of Federal Reserve Chairman Powell's policy leadership. Powell has always emphasized "patience," hoping to see stable inflation return to the 2% target before making policy adjustments. However, this restraint is now facing a dual challenge from within and outside. According to former Federal Reserve economist and current BNY Investments Chief Economist Vincent Reinhart, Federal Reserve governors rarely vote against the chairman's will, and similar dissent is more likely to occur as the chairman's term nears its end, as a bargaining chip to force the chairman to make language concessions in the policy statement or incorporate dissenting views in future meetings. Powell's term ends in less than a year (May 2026). Of the past 60 FOMC meetings, dissent has occurred in less than 16%, with dissent from governors accounting for only 3%. Most dissent usually comes from regional Fed presidents rather than board members. In addition to internal pressures, Powell also faces pressure from the White House. Trump has not only repeatedly asked the Fed to cut rates but also considered replacing Powell on the grounds of "out-of-control renovation budget." He criticized the confusion in managing the $250 million renovation project at the Fed headquarters and said Powell "will be out soon anyway." Although legal experts generally believe that "high renovation budget" is not a valid reason for dismissal, if the president actually attempts to push for a replacement, it will have a significant impact on the independence of the Federal Reserve. The current legal protection for the Fed Chairman from political interference is still a gray area. Renowned economist Mohamed El-Erian publicly called for Powell to resign last week, stating that this is the "only way to protect the independence of the central bank." Although Treasury Secretary Yellen denies the need for a change in leadership, he also calls for institutional reforms across the entire Federal Reserve.