01:36 PM EDT, 08/01/2025 (MT Newswires) -- The Federal Reserve should ease its monetary policy to avoid a potential deterioration in the labor market, governors Michelle Bowman and Christopher Waller, who dissented with this week's decision to hold rates steady, said Friday.

At the central bank's meeting earlier this week, both Bowman and Waller preferred a 25-basis-point reduction in its benchmark lending rate.

However, the Federal Open Market Committee decided to leave interest rates unchanged for a fifth straight time and said that economic growth likely "moderated" in the first half of the year. During a press conference after the meeting, Fed Chair Jerome Powell remained noncommittal regarding potential policy easing.

"With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting," Bowman said in a statement Friday. "This action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market."

Official data showed Friday that the world's largest economy added fewer jobs than projected in July, while gains in the previous two months were revised sharply lower. The odds of a 25-basis-point rate cut next month shot up to 83% Friday from 38% Thursday, according to the CME FedWatch tool.

"I see the risk that a delay in taking action could result in a deterioration in the labor market and a further slowing in economic growth," Bowman said. "Taking a proactive approach in moving closer to neutral would avoid an unnecessary erosion in labor market conditions and reduce the chance that the committee will have to carry out a significantly larger policy correction at a future date."

Separately, Waller said that the FOMC's wait-and-see strategy on rates was "overly cautious" and that recent data called for a monetary policy that's close to neutral rather than restrictive.

"While the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased," Waller said in a statement. "We should not wait until the labor market deteriorates before we cut the policy rate."

Both Bowman and Waller said that inflation was close to policymakers' target, excluding tariff effects that the two said will likely to be temporary.

US President Donald Trump has repeatedly criticized Powell and called on the Fed to cut interest rates. Trump recently said it was "highly unlikely" he would remove Powell from his post, but he said he doesn't "rule out anything."

Scotiabank said Friday that Bowman and Waller "may be right" in their approach. "They may also be applying for Powell's job," the firm said in a note to clients.