08:25 AM EDT, 08/01/2025 (MT Newswires) -- A rate reduction at this week's Federal Open Market Committee meeting would have been insurance against a further weakening in the US economy, Federal Reserve Vice Chair for Supervision Michelle Bowman said in a statement Friday explaining her dissent at the meeting, when she preferred a 25-basis point rate reduction.

"Inflation has moved considerably closer to our target, after excluding temporary effects from tariffs, and the labor market remains near full employment," Bowman said. "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. In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market."

Bowman said that she believes tariffs will be a one-time boost to prices, so the FOMC should look past that impact and focus on the downside risks to the employment side of the Fed's mandate instead.

"As I recognize that economic conditions are shifting, I believe that beginning to move our policy rate at a gradual pace toward its neutral level will help maintain the labor market near full employment and ensure smooth progress toward achieving both of our dual-mandate goals," Bowman said. "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."

Beginning to lower the target rate gradually now would mean the FOMC would not need to drastically reduce the target rate later if the economy does slow.

"In my view, it is also important that the Committee's approach to monetary policy decision making is consistent over time - especially when we are facing shifting economic conditions," Bowman said.

Fed Governor Christopher Waller, who, also preferred a 25-basis point reduction, issued a statement saying that the "wait and see" approach taken by the remainder of the FOMC is "overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve."

Waller said that he is concerned that in the time it may take to get clarity on the impact of the tariffs, the labor market could turn sharply and require swifter action by the FOMC.

"My position does not mean I believe the FOMC should reduce the policy rate along a predetermined path," Waller said. "We can cut now and see how the data evolves. If the tariff effects do not lead to a major shock to inflation, the Committee can continue reducing the rate at a moderate pace."