A MARTÍNEZ, HOST:
Let's talk more about why Federal Reserve Governors Christopher Waller and Michelle Bowman voted to lower interest rates and what that opposition might suggest. Peter Conti-Brown is a historian and legal scholar of the Federal Reserve who's written several books about the Fed and U.S. monetary policy. He's also an associate professor of financial regulation at the Wharton School of the University of Pennsylvania. So why are those dissenting votes so rare?
PETER CONTI-BROWN: They're rare because the Federal Reserve wants to project a sense of unanimity and expertise. And that's true during all times, all seasons, but it's especially true when the Fed has been politicized. Now, we are in an almost unprecedented period where President Trump and his advisers have politicized the Fed. So the time for unanimity, if there was ever a time for it, is now. The fact that we had two Trump appointees dissenting sends a very strong signal.
MARTÍNEZ: I thought the Fed was insulated from politics.
CONTI-BROWN: Well, insulation is not - it's not a switch that you flip. It's not like it's totally immune from political pressures or it's not. And what we've seen in the news cycle, in the - in President Trump visiting the Fed's headquarters and a lot of other moves is politics being pointed at the Fed. That happens all the time. It might be insulated from that, but that doesn't stop people from trying to inject politics into the Fed. What yesterday's meeting says is that there is some politics coming out from the Fed inside of the Federal Reserve. Those two dissenting votes send that signal.
MARTÍNEZ: Yeah. Those Fed governors, though, they're free to make their own decisions - right? - on interest rates. So, I mean, could it be the case that Waller and Bowman simply took the data, interpreted it differently than their colleagues, or are two of these - two Trump appointees putting some proxy pressure on Jerome Powell?
CONTI-BROWN: We have two - at least two explanations in front of us both available. You know, Governor Waller and Vice Chair Bowman might have just, as you said, looked at the data and come to a different conclusion. Certainly, Governor Waller had signaled that that's where he was coming down on this decision several weeks ago. The problem is that they made this decision in a specific context. It's not like they're in a vacuum. That's one of the problems with this myth of total independence, like the Fed operates completely separate from the news cycle. It doesn't. The Fed voted yesterday in the context of deep antagonism between the Trump administration and the Federal Reserve.
So for Waller and Bowman to signal this dissent, which we haven't seen since 1993, a double governor dissent, that comes in this context of politicization. So even if they see the data a little bit differently because they only wanted to change interest rates by 0.25%...
MARTÍNEZ: Yeah.
CONTI-BROWN: ...The content of that vote was much louder and much more political, even if they did see the data differently.
MARTÍNEZ: So the fact that we know that there was dissent - rare dissent, as you've put it - I mean, what does that mean for Jerome Powell, who's been under attack by the Trump administration for months?
CONTI-BROWN: It means that not all of his colleagues on the board of governors are with him. It means that not all of the wagons are in the circle. And that means that we should expect to see in the coming days, maybe even in the coming hours, President Trump grabbing - and his advisers grabbing hold of those dissenting views and weaponizing those against Powell and the Fed.
MARTÍNEZ: Could it be those dissenting governors are vying for Jerome Powell's job if Jerome Powell's no longer the Fed chair?
CONTI-BROWN: Not only could it be, but Governor Waller, to his credit, has been transparent about his interest in the job. So this may well be, you know, part of "The Apprentice: Federal Reserve Edition," where we're seeing some auditions happening weeks and months ahead of time.
MARTÍNEZ: So if the Fed bends, then, to political pressure, what could the result be for the United States and the global economy?
CONTI-BROWN: If the - if market participants in the United States and the world over see the Federal Reserve's moves here - moving interest rates to favor an incumbent politician - then that could be the beginning of the end of dollar stability. The U.S. dollar is our most important export. It is the infrastructure of modern global finance. And if people perceive the value of that dollar and its management as being totally partisan, the whims of the Oval Office, then that spells the end of, you know, a hundred and ten year or so history of incredible success.
MARTÍNEZ: Peter Conti-Brown is an associate professor at the Wharton School of the University of Pennsylvania. Thank you for your time.
CONTI-BROWN: My pleasure. Transcript provided by NPR, Copyright NPR.
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