COLOMBIA: Citi Turn Neutral COP, From OW, On Election Concerns

• In changing the Statement to announce the rate hold at 3-1/2 to 3‑3/4 percent, the FOMC is expected to also retain the forward guidance language which continues to provide flexibility without guiding markets to any particular outcome.
• The Statement added “extent and timing” to "additional adjustments" in the December statement to signal that after 3 consecutive cuts, the easing bias remains but the pace has slowed and the next move will be data-dependent.
• We've seen some expectations that guidance could be tweaked slightly: for example, removing "additional" from the reference to adjustments (JPMorgan). Additionally we wouldn't be too surprised by the reference to "the shift in the balance of risks" to be removed (Wells Fargo).

• The paragraph on reserve management purchases will be deleted.
• MNI’s Instant Answers questions for the meeting include a tally of dissenters.
• We’d be surprised if there were any dissenters apart from Gov Miran who has dissented in favor of a larger 50bp cut at each of the meetings he’s participated in since September 2025. He said after the December meeting that he hadn’t decided on whether he would support a 25bp or a 50bp cut in January, but he is eyeing 150bp of cuts in 2026 and it’s clear he will deliver a dovish dissent all the same. Gov Bowman is an additional possibility to deliver a dovish dissent, with some seeing Gov Waller joining them.
• The Implementation Note could at some point include a tweak of administered rates, including a nudge lower in the interest rate paid on reserve balances from the current 3.65%, or the standing repo facility rate of 3.75%. We include these in our Instant Answers, just in case - we don’t expect any move at this meeting (and as far as we can tell, neither does any analyst).

• RES 4: 1.22736 2.236 proj of the Nov 21 - Dec 16 - Jan 19 swing   
• RES 3: 1.2218 High Jun 15 2021 
• RES 2: 1.2147 High Jun 16 2021 
• RES 1: 1.2081 High Jan 27
• PRICE: 1.1941 @ 17:05 GMT Jan 28
• SUP 1: 1.1938 61.8% retracement of the Jan 27 high - low range
• SUP 2: 1.1850 Low Jan 27 
• SUP 3: 1.1747 20-day EMA
• SUP 4: 1.1704 50-day EMA  

A strong bull cycle in EURUSD remains in play, although prices have faded off the cycle high printed on Tuesday. Note that the uptrend is in an extreme overbought position and this highlights the risk of a corrective pullback - to unwind the overbought reading. The firm support to watch is at the 20-day EMA, at 1.1747. For bulls, a continuation higher would open 1.2147 next, the Jun 16 2021 high.

With no economic projections released at the January FOMC meeting, immediate attention will be on Statement changes vs December's. Going paragraph by paragraph through the previous (December) statement in italics - Link to December FOMC statement

• While the post-federal government shutdown data flow has picked up considerably, the distortions in what we have received in the major indicators (nonfarm payrolls, CPI/PCE) may limit the FOMC’s appetite to convey any conclusions in the opening paragraph – particularly so given there is no need to make a case for another cut at this meeting.
• Describing economic activity as having risen at a “moderate pace” could be upgraded to “solid pace” (in Gov Jefferson’s words). Describing job gains as having “slowed” (albeit over the past year or so rather than “this year”) may be left unchanged though the reference to unemployment having “edged up through September” needs revision given that it reverted back to September’s level (4.4%) in December. Noting that it’s stabilized would be a slightly hawkish, if factual, shift, though the Statement could merely note that it’s moved up over the past year.
• Trickier is the description of inflation which has waned to multi-month lows on a year/year basis and was surprisingly subdued on a sequential basis in Q4, but these diminishments were in large part due to methodological reasons – inflation hasn’t “moved up” in the data since the December meeting but neither has it truly eased. They may simply describe it as “somewhat elevated” without describing its latest movement.
• There may have to be a tweak in the 2nd paragraph on the balance of risks to recognize that the available data indicate that the downside risks to employment don’t appear to have risen in the most recent months - in particular due to the downtick in December’s unemployment rate. This latter clause may be deleted, leaving the language that the Committee is “attentive to the risks to both sides of its dual mandate”.
• Some analyst expectations on this - Deutsche: “we expect the Committee to drop its prior reference to rising labor market risk and simply state “The Committee is attentive to the risks to both sides of its dual mandate.” However, we expect the statement will stop short of the “roughly in balance” language used to describe the risk distribution last January"; JPMorgan: "To drop “downside risks to employment rose in recent months” but still note it’s attentive to risks to both sides"
• We have little strong conviction on what changes could be made to these paragraphs, particularly the 1st paragraph – but it’s unusual for this portion to be a market-mover, especially since whatever emerges is probably intended to convey neutrality in the face of distorted and inconclusive data.