REPEAT: POV: 3 SCENARIOS FOR FOMC: A 25bps......>

FED: REPEAT: POV: 3 SCENARIOS FOR FOMC: A 25bps hike in the Funds rate and

technical 20bps hike in IOER are fully priced in for Wednesday's FOMC meeting.

- MNI PINCH shows 75% chance of Sep hike, and 35% for a further hike in Dec.

- Focus is on language and dot plot medians, which are 1 vote away from

signalling 4 hikes in 2018, and 2 votes from going from 2 to 3 2019 hikes.

- Hawkish: Statement puts September hike in focus, with a rise in the median dot

plot pointing to a 4th 2018 hike in Dec. Risks to outlook `balanced`, removing

`roughly`. Market reaction: USD rises initially but gains fade due to already

bullish positioning. 10Y Tsy yields rise, with recent high of 3.126% in focus,

but Tsy curve bear flattens as short end sells off.

- Neutral: Statement puts December hike in focus, unchanged dot plot median,

only 1 more hike in 2018. Market reaction: USD weakens.

- Dovish: Future hikes pushed back, no movement in dot plot or even possibly a

lower median. Emphasises `gradual` tightening, and `closer to neutral` forward

guidance to limit hawkish message to market. Market reaction: Tsy curve shifts

lower but bull steepens as short end rallies, USD drops sharply.