COMMODITIES: Precious Metals Pull Back Sharply, Crude Rallies

The key paragraph from the December FOMC meeting minutes (link here) indicates (as did the meeting Dot Plot) a sizeable minority of members seeing no further easing through end-2026, but a base case among a solid if narrow majority that further limited cuts would ensue if the data cooperate.

• It was: "Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected. With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting." But "all participants agreed that monetary policy was not on a preset course".
• The 25bp cut itself was a finely-poised decision. While "most" of the 19 FOMC members backed a cut, "some" (which in Fed-speak is less than "Many" but more than "Several") members preferred to keep the target range unchanged.
• Keeping in mind that that 6 members pencilled in no cut in their Dot Plot, an additional "few" who could have supported a hold implies that the Committee was evenly split on a rate cut vs a hold coming into the meeting: "A few of those who supported lowering the policy rate at this meeting indicated that the decision was finely balanced or that they could have supported keeping the target range unchanged."
• Indeed the "some" who saw rates on hold for "some time" after this meeting is consistent with the 7 members who pencilled in rates at or above the current 3.6% Fed funds midpoint by end-2026.
• Putting a finer point on it, "Those who favored lowering the target range for the federal funds rate generally judged that such a decision was appropriate because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier in 2025 or were little changed." But "Those who preferred to keep the target range for the federal funds rate unchanged at this meeting expressed concern that progress toward the Committee's 2 percent inflation objective had stalled in 2025 or indicated that they needed to have more confidence that inflation was being brought down sustainably to the Committee's objective."
• Indeed the bar to a January cut remains high - the holdouts even appeared to suggest that they were concerned that a December cut would be shown as unwarranted in retrospect:  "Some participants who favored or could have supported keeping the target range unchanged suggested that the arrival of a considerable amount of labor market and inflation data over the coming intermeeting period would be helpful in making judgments on whether a rate reduction was warranted."

• Treasury futures show little reaction to the FOMC minutes release for the December meeting, holding modest losses, near midrange for the day
• Currently, TYH6 trades 112-20 (-3.0) vs. 112-17 low / 112-25.5 high, curves mixed: 2s10s at 66.528 +1.165, 5s30s -.381 at 112.333.
• Trend theme remains bearish and a break of 111-29 would confirm a resumption of the bear cycle. This would open 111-19, a Fibonacci projection. Key short-term resistance has been defined at 112-31, the Dec 18 high, where a break would undermine a bear theme and signal scope for a stronger recovery instead.
• Bloomberg US$ index firmer: BBDXY +1.25 at 1202.72

• MOST SAW FURTHER CUTS IF INFLATION DECLINES - FED MINUTES
• SOME WANT RATES UNCHANGED FOR SOME TIME AFTER DECEMBER
• PARTICIPANTS EXPRESSED RANGE OF VIEWS ON RESTRICTIVENESS
• PARTICIPANTS JUDGED CAREFUL BALANCING OF RISKS REQUIRED
• PARTICIPANTS SEE ELEVATED NEAR-TERM PRICES, RETURN TO 2%
• MOST SEE LABOR MARKET RISKS TILTED TO DOWNSIDE