The dissent is nothing new within the FOMC. There were always the concerns about the impact of the reciprocal tariffs imposed by Donald Trump. However, it is a matter of debate; which side the impact would veer towards. The Fed has a dual mandate of managing price stability and also ensuring that the US economy was as close to full employment as possible. Incidentally, the reciprocal tariffs would have an impact on inflation and jobs. It will spike inflation, on the one hand, but will also reduce job additions, and impact the consumer spending in the economy.

The status quo camp is dominated by Jerome Powell and other members of the FOMC. This camp believes that the most likely impact of higher tariffs will be seen on inflation as higher tariffs will translate into higher imported costs and, hence, higher imported inflation into the US. Their argument is that, it is essential to protect the economy from the effects of very high inflation and that is possible only if the Fed has ammunition left in its monetary arsenal. That is only possible if they hold back on rate cuts, and keep it for a rainy day, should inflation spike! 

The August 2025 FOMC meet marked the first occasion when there were 2 FOMC governors giving a dissent note. Chris Waller and Michelle Bowman, dissented with the decision of the FOMC and asked for a 25-bps rate cut with immediate effect. This camp believes that overall impact on inflation will be there, but it will be a one-time impact. However, the more structural impact will be on jobs, growth, and consumer spending. The recent data flows back this view. In July, the rate of unemployment went up to 4.2%, while the non-farm payroll adds were around 73,000 a month. Even the non-farm payroll additions for May and June got lowered to that level in July. 

For now, the first camp has an upper hand, but that appears to be slipping. Already, Trump is putting pressure on Jerome Powell to resign. While, he has the necessary constitutional guarantees for his job, it remains to be seen how much longer Powell would want to take the stress. For now, the Powell camp is likely to stick to the no-rate cut view. However, should Powell decide to move out earlier; things could shift quite fast, depending on who takes the helm at the Federal Reserve. A lot will depend on the outcome of the discussions at Jackson Hole, although rates are likely to remain data-driven. For now, the only certainty in US Fed is that, dissent is staying!