By Derek Tang

About the author: Derek Tang is an economist at LH Meyer, a policy analysis firm.

Jerome Powell has less than six months remaining as chair of the Federal Reserve. But he demonstrated Wednesday that his leadership remains intact -- and strong enough to prevent tension in the Fed's dual mandate from devolving into deleterious tension within the committee.

Plenty of attention has been placed of the unusually high number of dissents, or Federal Open Market Committee voters who disagreed with the rate decision, and the shape of the committee's dot plot, a chart showing where each FOMC participant thinks rates are headed. Yet Powell was able to get most of the voters on the same page for a quarter point cut at the committee's last meeting of the year, without having to make major changes to his public messaging.

That Powell managed to corral such differing minds amid intense economic uncertainty is a credit not only to his leadership, but also to his institution's internal and external communication mechanisms.

The lead up to this week's FOMC meeting was more fraught with uncertainty than usual. The Fed lacked usual government data because of a prolonged government shutdown and faced compounding risks, such as the Trump administration's immigration and trade policies. Cracks were forming in the labor market, and inflation was rising. Powell himself stressed in October that a December cut was "far" from a foregone conclusion.

The market took him at his word, perhaps to a fault. Expectations for a December hold rose to near-certainty.

But the tide turned when New York Fed President John Williams, the second most important FOMC member and Powell's right hand man, strongly hinted a coming rate cut in a speech in late November.

Powell must have allowed, if not actively shaped, such a public message. It reminded the market of past Fed efforts to correct market pricing with communication coordinated by leadership. The markets responded by elevating the odds of a December rate cut to near certainty.

But the more interesting issue is how that went down without alienating those who thought otherwise. In retrospect, even though he clearly disagreed with the hawks, Powell went to great lengths to give the hawks due deference in his October remarks.

The Fed's messaging apparatus is built to accommodate dissenters. Dot plots and macro projections serve as a pressure safety valve where disagreement can be hashed out, without harming the consistency of the policy message.

Far more effective, however, is to influence the outcome early and from within. Powell's assiduous outreach to his colleagues gives him a good overview of where the proverbial bodies are buried, giving colleagues ample time to voice their objections. Powell can then use the FOMC statement, as a venue for horse trading: How can the message be tweaked to address your concerns?

In times of high uncertainty, irreconcilable differences may mean further changes to the statement would mean robbing Peter to pay Paul. This makes the largely-intact FOMC statement this time all the more impressive.

It also helps that the source of the committee's disagreements is so clearly coming from outside the Fed. If there is any tension in the mandate, it is thanks to the unprecedented structural environment in which the U.S. economy finds itself. The complex economic environment naturally gives rise to diverging opinions. Disagreement is "inherent" in the current situation, Powell said.

"You just have people who have strong views," he said. "The discussions we have are as good as any we have had in my 14 years at the Fed."

Fed officials naturally hold different views on policy -- all the more so when economic uncertainty is so high. But in December's Summary of Economic Projections, they all agreed on the macroeconomic outcomes their policy should create. All agreed on a time frame of a couple of years to return inflation to 2%, gradually enough that the unemployment rate never has to rise above 4.6%. In other words, not even the hawks are willing to stomach more harm to the labor market just to get inflation down to 2% faster.

Still, Powell signaled Wednesday the Fed might pause rate cuts for a while. Having laid the groundwork for a prolonged pause, the committee is now well positioned for watchful waiting. With the choice ahead between holding and cutting more, the committee now has some room to maneuver -- even as political pressure mounts -- thanks to Powell's deft handling and communication.

What weighs on markets is if the next Fed chair can fill his shoes.

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December 12, 2025 15:11 ET (20:11 GMT)

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