LATAM: Week Ahead: Chile/Colombia/Peru CPI, Brazil Q3 GDP

With no quarterly projections at the October meeting, attention upon the 2pm ET FOMC decision release will be on the policy statement - and to an unusual extent, the accompanying Implementation Note which discusses among other things administered policy rates and balance sheet directives. Going paragraph by paragraph through the previous (September) statement in italics: (Link to September FOMC statement)

• The upward revisions to Q2 growth and continued momentum apparent in the data through Q3 should warrant an upgrade in the description of economic activity.
• With no new nonfarm payrolls data since September however, the description of job gains/unemployment should remain the same (one could justify that both continued in the latest data through ADP private payrolls data/Chicago Fed unemployment estimate for September).
• There may be scope for a mention of the lack of official government data during the federal shutdown in this context, perhaps indicating as Chair Powell did in his inter-meeting speech that the assessment of the economy is based on a “wide variety of public and private sector data” that remains available.
• As for inflation, the softer-than-expected September CPI reading could argue for nudging the language in a slightly more dovish direction (ie modifying “has moved up”) but it would not be surprising to see this unchanged.

• The Statement will of course announce the rate cut decision, but we don’t expect any change in the forward guidance “in considering the extent and timing…”. The current language leaves the door open to further cuts but does not pre-commit, which is likely where the FOMC majority’s mindset is now. It’s unclear whether they will cite the shift in the balance of risks again (they added this language in September to justify the resumption of easing) but any change here should be inconsequential.
• In our review of sell-side analysts, no analyst expected the characterization of the balance of risks to be changed. Likewise, there are no core views that forward rate guidance will be changed - though JPMorgan cites risks the Statement could mention "in considering the extent and timing of additional adjustments" to hint an imminent end of the mini-easing cycle.
• The QT language will be the most closely-watched part of the statement. We think that an end to balance sheet runoff will be signaled here – we discuss in more depth elsewhere in our meeting preview.

• We see hawkish risks headed into the BoJ decision Thursday. A full 25bps hike is not priced until March next year, potentially tilting markets for a more aggressive pricing of faster hikes after this week's meeting.
• Assuming an unchanged decision, the focus will be on hiking risks into year-end. While only a small minority of the BoJ board (we had two dissenters looking for a 25bps hike at the Sep meeting) sees the inflation goal as having already been met, the core membership of the board isn’t at this stage yet.
• In one of our recent exclusives, we highlighted that while U.S. trade policy may weigh on the Bank of Japan’s internal assessment of underlying CPI from late this year into early 2026, policymakers do not expect it to derail its rate-hike path from the December meeting onwards. Further confidence in this path of travel could spur repricing for December, supporting JPY as a result.
• An overnight USDJPY straddle incorporates a move of +/- 110 pips from current spot levels, potentially highlighting that key resistance around 153.25 (respected on Monday) will continue to cap the topside.
• Conversely, a move lower for USDJPY might garner more momentum given the more optimistic tone provided by US/Japan officials this week and as short-term positioning is squeezed. Market participants will also be aware that the politically driven gap at the start of the month has yet to be filled, and would require a move to 147.47 for this to happen. Interim support levels to watch are 151.19 (20-day EMA) and 149.38, the Oct 17 low.

• EUR/USD: Nov04 $1.1635-40(E1.3bln)
• USD/JPY: Oct31 Y152.50($1.2bln)
• USD/CAD: Oct31 C$1.3500($1.1bln)