New Federal Reserve News Agency: Powell's "second-to-last" policy meeting, Fed divisions intensify

In the final phase of Powell’s tenure as Fed Chair, a rare internal split is surfacing. At tonight’s rate meeting, as many as three governors nominated by Trump are expected to jointly cast dissenting votes in support of rate cuts—this would be the first time since 1988 that three governors jointly oppose the majority at a single policy meeting. This situation signals that incoming Chair Walsh is about to take over a committee with deepening divisions.

According to “the new Fed correspondent” Nick Timiraos in a June 17 article for The Wall Street Journal, the uncertainty sparked by the Iran war is expected to reinforce the majority’s stance to keep rates unchanged, but it also makes potential dissenting votes even more conspicuous. Governor Stephen Miran has supported rate cuts at every meeting since joining the Fed last September; Christopher Waller cast a dissent at the January meeting; Michelle Bowman said in a television interview two weeks ago that the economy “may need the support of policy rates.” All three were Trump’s nominees, and Trump publicly called for an immediate Fed rate cut last week.

The significance of this situation lies not just in the vote count—but more importantly, that all three governors come from the same president who has openly pressured the central bank, and their voting tendency is closely aligned with his demands. Former Boston Fed president Eric Rosengren said, “If markets think these governors are acting in a politicized way, ‘that would be an extremely dangerous situation.’”

BNY Investments chief economist and former senior Fed adviser Vincent Reinhart warned that, as Trump may have more opportunities to nominate, investors’ predictions of the Fed “will henceforth depend more on political economy, rather than macroeconomics.” According to CME FedWatch data, the market expects a 99% probability that the Fed will keep rates unchanged in the 3.5%-3.75% range.

Structural Weight of Governor Dissent

Fed rate policy is decided by a 12-member committee, composed of two categories: seven governors nominated by the president, who are based at the Washington headquarters; another five seats are rotating among the twelve regional Fed presidents, the latter selected by boards composed of local business and nonprofit leaders, not political appointees.

Timiraos notes, dissenting votes from regional Fed presidents are common; governor dissents have historically been extremely rare, thus more impactful. This convention is increasingly being broken. In 2024, Bowman became the first governor in nineteen years to oppose a policy decision, when she voted in favor of a smaller rate cut. Last summer, she teamed up with Waller to dissent in favor of looser policy—this was the first time since 1993 that two governors jointly opposed the Chair. At last December’s meeting, there were three dissents, but in opposite directions—two regional presidents opposed rate cuts, while Miran advocated bigger cuts. At the January meeting, Miran and Waller dissented together again.

The Respective Positions of the Three Potential Dissenters

Timiraos says the three governors each have their own emphasis. Miran’s stance is the most decisive, and he has never stopped dissenting since taking office; previously, he was a senior economic adviser in Trump’s administration. After dissenting in January, Waller is seen as a strong candidate to dissent again this week—February’s unexpected drop in nonfarm payrolls convinced him the labor market was approaching a “tipping point.” Bowman cited the same jobs report, saying the economy “may need rate cut support”; in her December rate projection, she outlined a path for three rate cuts in 2026, more than most colleagues. Last year, Trump appointed Bowman as Fed Vice Chair for bank supervision.

However, some former officials question whether current economic fundamentals support rate cuts. The Iran war has driven oil prices sharply higher, adding another inflation source amidst potentially incomplete tariff pass-through; the Fed’s preferred inflation index already exceeded 3% before the conflict. Jim Bullard, former St. Louis Fed president and now dean of Purdue’s business school, said:

“Casting a dissent when core inflation is above 3% and continuing to move the wrong way signals you disregard inflation. I think it's a hard stance to justify.”

The Boundary Between Healthy Dissent and Political Fracture

Timiraos notes several former officials express concern over the evolution of this pattern. They distinguish two types of dissent: occasional dissent by governors based on their own judgment, versus Trump’s nominees dissenting together at every meeting in line with the president’s expectations.

Citing Rosengren, Timiraos points out that in countries whose central banks have been eroded by political pressure, the public ultimately loses confidence that officials will take necessary steps to rein in inflation, and this loss of trust itself makes inflation harder to contain. The deeper risk is that apparently healthy dissent turns into partisan conflict, like the Supreme Court—individuals may believe they’re following independent analysis, but the public just sees partisan alignment. This marks a profound shift for the Fed, as the tradeoff between price stability and employment policy has never historically split along partisan lines.

In contrast, institutions like the Bank of England have long been accustomed to splits in policy vote counts. The Fed has previously avoided this, not because officials always agree, but because strong consensus lets markets focus on economic outlook rather than guessing which faction will dominate the next decision. Waller himself admitted the risks of split votes last year:

“If we actually get a 7-5 vote, next time one person changes their stance, the entire rate path changes.”

Sides Positioning During Transitional Period

Timiraos points out that this week’s potential dissents are unlikely to be interpreted as a direct challenge to Powell’s leadership—his term ends in May, and Walsh awaits Senate confirmation. More likely, both sides of the committee are using Powell’s transition period to establish their positions and set the tone for the pending policy handover. Hawkish officials could use this week’s quarterly forecasts to clearly signal opposition to rate cuts while inflation exceeds the 2% target. Rosengren said, “Both sides will pay more attention to how they influence the new chair’s view of committee dynamics.”

For regional Fed presidents, this week’s situation may also serve as a reminder that the political ecosystem of monetary policy has fundamentally changed. Reinhart says that if Trump gains more nomination power in the future, this political force will keep growing. His conclusion is simple and powerful: “It should remind people that, from now on, predicting the Fed depends more on political economy than on macroeconomics.”

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