US NATGAS: US Northeast Natgas Prices Fall on Day

• The first clause of the forward guidance sentence was changed in December from “in considering additional adjustments to the target range for the federal funds rate,” with the new language of “In considering the extent and timing of additional adjustments” suggesting that the Committee’s easing bias remained but would take a more measured approach.
• This is very unlikely to change in January.
• There is a reasonable expectation that the Fed at this meeting will discuss altering balance sheet policy, but this would be in a prospective way and there is almost no chance that any decisions will be made or communicated.
• The last paragraph is expected to be unchanged once again ("In assessing the appropriate stance of monetary policy...").
• No dissents are expected to a hold.
• In the Implementation Note, no adjustments to administered rates are expected (after December’s 5bp downward adjustment to the ON RRP offer rate).

Looking ahead to the updated FOMC Statement - going paragraph by paragraph through the December statement (Link) in italics:

• Changes in the Statement will reflect that we’ve entered a new year: for example, “since earlier in the year” will likely be changed to “since early last year”, or similar.
• The first paragraph on economic conditions wasn’t changed in the December statement, and there is little reason to believe it will be changed substantially this time.
• There is potential for “has moved up” – with reference to the unemployment rate – to be deleted, leaving it as “remains low”.
• With December's inflation data looking fairly benign, inflation language is likewise set to remain untouched but risks lean somewhat hawkish if the Committee wants to signal any discomfort here (our Instant Answers looks for any change to this language).
• As for the second paragraph, there’s no urgent need to signal any changes to the balance of risks on the basis of recent data. A change to the perceived balance of risks here would be a major surprise.

• We focused on the tariff scenarios from the MPR prior to the press conference earlier, but for completeness, the baseline forecast showed stronger CPI and weaker GDP growth compared to October’s update.
• Bearing in mind that this forecast assumed no tariffs, aside from some uncertainty weighing on investment in the near-term, GDP growth was revised down to 1.9% Y/Y in Q425 (from 2.3%) and 1.7% Y/Y in 4Q26 (from 2.3%).
• As Gov. Macklem repeated in the press conference, the severe tariff scenario in the MPR showed variations with a 2.5-3pp hit to GDP growth in the first year which could suggest a recession.
• CPI inflation meanwhile was lifted from 2.0% to 2.4% Y/Y for 4Q25 and a much more modest 2.1% Y/Y from 2.0% for 4Q26.
• That doesn’t reflect core CPI though, which overshot prior forecasts with 2.6% Y/Y in Q424 (originally 2.3%) but after that is still seen at 2.1% Y/Y in 4Q25 before only a marginally stronger than first forecast 2.1% in 4Q26.
• As for excess supply, the output gap is estimated between -1.25 to -0.25% GDP as of Q4, seen unchanged from Q3 but in itself revised up from -1.75% to -0.75% GDP estimated in October prior to recent GDP revisions.