**MNI POLICY: FOMC Will Be 'Patient' Amid 'Muted Inflation'>

--Prepared to Adjust Balance Sheet Plan If Needed

--Rates Remain Primary Policy Tool

--Commits to Abundant Reserves Policy Implementation Framework

By Jean Yung

     WASHINGTON (MNI) - The following are the key points from the 

FOMC statement released Wednesday:

     --The FOMC held rates steady at a 2.25% to 2.5% range and said it 

"will be patient" in light of "muted inflation" and "global economic and 

financial developments," a pledge likely to be interpreted by investors 

as a bias toward keeping rates on hold for the first half of the year. 

     --In updated guidance on balance sheet normalization, the FOMC said 

it is "prepared to adjust any of the details for completing balance 

sheet normalization in light of economic and financial developments." 

However, it also emphasized that the fed funds rate is its "primary 

means" of adjusting the stance of monetary policy. It would consider 

only altering the size and composition of its balance sheet if 

conditions were to warrant a more accommodative policy "than can be 

achieved solely by reducing the federal funds rate," it said. 

     --Forward guidance on "further gradual increases" in rates was 

removed as well as its assessment on balance of risks, as the FOMC 

pivoted further toward data dependence. In place of a commitment to 

higher future rates, the committee said it continues to view economic 

growth, strong labor market conditions and inflation near its 2% 

symmetric target as "most likely outcomes." 

     --The FOMC formally committed to the abundant reserves policy 

implementation framework it has employed since the financial crisis, a 

decision long expected by market participants. The Fed intends to ensure 

control over short-term interest rates through the fed funds rate, 

rather than through open market operations to management reserves 

supply, it said. 

     --Its discussion of inflation noted that market-based measures of 

inflation compensation have "moved lower in recent months," though 

survey-based measures were "little changed" and overall inflation and 

core inflation "remain near" 2%. 

--MNI Washington Bureau, Tel: +1 202-371-2121; email: dcoffice@marketnews.com

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