EMISSIONS: EU Commission Sets to Propose EU ETS Changes After Summer 2026

The December FOMC meeting minutes (out 2pm ET today) will be watched for confirmation that there is a high bar in the upcoming releases to a follow-up cut in January (only 4bp easing is priced). 

• Our review of the December FOMC meeting is here: recall that the FOMC delivered what was widely anticipated to be a “hawkish cut”, lowering the Funds rate range by 25bp to 3.50%-3.75% while portraying a cautious stance on further adjustments in the Statement and Dot Plot.
• The main theme here is likely to be disagreement over the path forward. At the press conference Chair Powell summed up a more patient stance going forward: "We're going to get a great deal of data between now and the January meeting, and I'm sure we'll talk more about that, and that will the data that we get are going to factor into our thinking.... We're well positioned to wait and see how the economy evolves from here….We will have to see. We will get quite a bit of data."
• There were of course already several members who preferred not to ease at the December meeting, including dissenters Schmid and Goolsbee; the 2025 end-year Dot Plot saw 6 members pencil in no cut at the meeting. For 2026, while the median member saw a 3.4% end-year rate implying 1 more 25bp cut, 7 of 19 participants saw rates concluding the year at either 3.6% or 3.9% - in other words, no lower than the current level.
• The latest major data releases don’t seem to have swayed opinions one way or another, with the limited commentary we have received so far (see below) suggesting that FOMC participants are discounting the seemingly-soft CPI and unemployment readings as distorted by technical factors. That puts more importance on the upcoming December nonfarm payrolls (Jan 9) and CPI (Jan 13) releases, but even so the bar appears to be set high for a cut at the January meeting. A side note: it will be interesting to see in the Minutes if the Committee discussed their estimates of how much nonfarm payrolls are “overstated” (Powell said in the presser that monthly job gains were overstated by around 60k).
• With the biggest surprise at the meeting being the Fed’s decision to launch reserve management purchases immediately, we will be watching for the discussion that led to this move, as well whether they considered shifting administered rates (eg IORB) or implementing temporary open market operations in order to keep a lid on effective policy rates.
• MNI's full preview is here (PDF).

A few analyst expectations:

• Deutsche: “we will be looking for any information that helps to define the contours of the policy disagreements amongst the Committee”
• JPMorgan: “expected to reveal that participants continue to hold strongly differing views on the near-term policy outlook”
• TD: “will likely shed more light on the division within the Committee while signaling a majority of participants believed it would be reasonable to slow down the pace of easing”

Our preview of the December FOMC meeting minutes (out at 2pm ET) has been released: Download Full Report Here

• This publication includes what to watch for upon release; MNI's FOMC Hawk-Dove Spectrum; analyst expectations; and key highlights of FOMC participant commentary since the meeting.

The DMO has announced it will be looking to sell GBP4.25bln of the 4.125% Mar-31 Gilt (ISIN: GB00BVP99673) at its auction next Wednesday, January 7.