CHILE: Camara Swaps Curve Bull-Flattens After Robust Data, IMACEC, CPI Next Week

The Bundestag has approved a conservative Christian Democratic Union (CDU) motion regarding a five-point plan to end illegal immigration by 348 votes to 345 with 10 abstentions. The motion passed with the support of the far-right Alternative for Germany (AfD) and the pro-business liberal Free Democrats (FDP). The motion is not legally binding on the gov't of Chancellor Olaf Scholz. 

• A more consequential vote is set to come on Friday 31 Jan. As The Guardian reports, the passage of the motion will "greatly escalate tensions between the CDU and Scholz’s government and would give Merz the upper hand in terms of trying to push the motion into law, the process of which could start as early as Friday."
• Friday's 'Influx Limitation Law' looks likely to pass given that the left-wing nationalist Sahra Wagenknecht Alliance (BSW) - whose 10 deputies abstained today - has indicated it will support the legislation.
• Once passed by the Bundestag, backing from the Bundestrat (upper house) would be required.  The Guardian reports: "The earliest date for a next sitting of that house would be 14 February, nine days ahead of the general election. However, they are not likely to approve it because the CDU/CSU does not have a majority there."
• Post-election, with the CDU/CSU likely to be in a position to lead the next gov't the legislation could make a return. The CDU's coalition partners - likely the centre-left Social Democrats or Greens - could look to dilute the legislation. 

Recapping the outlook for today's Fed decision (preview here): After easing by 25bp at the December meeting (to a Fed funds rate range of 4.25-4.50%), the Fed hinted strongly that it would keep rates on hold at January as it assessed the landscape after delivering 100bp of cuts. 

• Taking the FOMC's latest rate guidance at face value: they are assessing the "extent" and "pace" at which future adjustments are to be made, but by the same token, they do not outright promise further cuts. The data has cooperated with the patient approach: after nonfarm payrolls came in stronger than expected almost across the board, the CPI report mid-month was a little softer than expected.
• With minimal Statement changes expected and no new rate/macro projections (indeed the data since the December projections aren’t cause for any revisions anyway), the focus will be on Chair Powell’s press conference. We expect Powell to repeat the same themes heard six weeks earlier, with the following re-delivered verbatim:
  • “We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will assess incoming data, the evolving outlook, and the balance of risks. We’re not on any preset course.”
• This should be a “neutral” meeting but the setup is for  market reaction to lean slightly dovish in the context of only one more full rate cut being priced for the cycle and not until June.
• While he won’t be able to add any additional commentary on the Fed’s response to prospective fiscal/trade/immigration policy shifts, we suspect Powell will remain optimistic on the inflation trajectory and reiterate that 50bp of cuts remain the FOMC’s baseline scenario this year. In other words, the bias toward easing remains intact – though uncertainty remains high.
• Powell probably won’t completely rule out another cut as soon as the next meeting in March.
• Additionally, the FOMC is due to begin discussing its 5-year framework review at this meeting though only in preliminary fashion, while we would not be surprised if there were also initial discussions over balance sheet policy in 2025 (though serious decisions on halting QT will probably not be mulled until at least March or May.

• Stocks are trading mixed by midmorning, DJIA near steady while tech stocks weigh on SPX Emini and Nasdaq Indexes. Currently, the DJIA trades down 0.05 points (0%) at 44850.23, S&P E-Minis down 23.25 points (-0.38%) at 6074, Nasdaq down 150.2 points (-0.8%) at 19583.94.
• Information Technology sector shares were back under pressure, led by semiconductor makers after rebounding yesterday from the week opener's rout as China's AI startup DeepSeek continued to make headlines - not all positive:
• Reuters report "Chinese AI startup DeepSeek's chatbot achieved only 17% accuracy in delivering news and information in a NewsGuard audit that ranked it tenth out of eleven in a comparison with its Western competitors including OpenAI's ChatGPT and Google Gemini."
• Leading IT sector laggers included Nvidia -4.75%, Palo Alto Networks -3.41%, Crowdstrike -3.25%. Real Estate sector followed with office and hotel REITs underperforming: BXP Inc -3.07%, Host Hotels & Resorts -2.11%.
• On the positive side, Consumer Staples and Financial sectors outperformed in the first half, Walgreens Boots +4.13%, Kroger +1.82%, Chubb +3.11% and Synchrony Financial +2.15%.
• Reminder, more earnings expected after the close: IBM, Waste Management, Tesla, ServiceNow, Lam Research Corp, Meta Platforms, Microsoft, Ameriprise Financial, Wolfspeed, Western Digital, United Rentals, Teradyne, Las Vegas Sands Corp, Raymond James Financial and Whirlpool Corp.