MNI - With no changes expected to the Funds......>

US: MNI - With no changes expected to the Funds rate Wednesday, attention is on

the FOMC's tone, and balance sheet runoff policy.

- The most common word used by sell-side analysts to describe the upcoming FOMC

meeting's tone is 'patience', followed closely by 'flexibility' - in line with

Fedspeak from Chair Powell and other committee members since early Jan. 

- Lack of data due to gov't shutdown and market stability over the past month

also bolster case for the Fed to enter wait-and-see mode. 

- As such, the base case: statement amends 'gradual increases' guidance on rate

hikes, replacing with emphasis on flexible/data-dependent approach - with Powell

reiterating this in the presser (thus walking back Dec's hawkish tone). 

- Re balance sheet: no change, but policy addendum could be changed. Powell

likely to hint all options are open, while FOMC considers those options. 

- Hawkish risk: No indication that Fed reconsidering balance sheet policy,

minimal/no change to rate guidance, no nod to weaker economic outlook. 

- Dovish risk: Substantive announcement on ending asset runoff. Balance of

economic outlook risks downgraded; explicit language that rates are on hold.