Three things markets are expecting to hear from the Fed and Powell

Here are three comments investors expect to hear Wednesday afternoon.

1. Balance sheet. The Fed’s balance sheet is now in play, following news reports that the program is under discussion by Fed officials and not on ‘autopilot’ forever.

“It clearly is one of the main things under discussion,” said Luke Tilley, chief economist at Wilmington Trust. “I think it will be a fairly uneventful meeting in terms of the information we get, as the public.” But Tilley expects the Fed will be debating what level it wants the balance sheet to be and Fed staff is probably set to deliver a presentation on it.

As for Powell, Fed watchers expect him to sound flexible on the balance sheet policy and note that its under review.

2. “Patience and flexibility”. Powell introduced that the Fed could have “patience” when he sat on a panel with former Fed chairs Ben Bernanke and Janet Yellen in early January. That was a soothing phrase and one the markets expect to hear again.

“I think they need to add some language about patience and needing to be patient. That’s what the markets want right now,” Harris said.

3. Listening to data and markets. Data dependence takes on a new meaning. Fed officials are expected to continue to emphasize that they will base rate decisions on incoming data, instead of hiking on a pre-set schedule. But Fed watchers expect them to also emphasize that they will pay attention to the type of message they can get from markets and business leaders on the economy.

Further, Powell will likely be asked to discuss what the Fed has done while it went without weeks of government data that was unavailable, due to the government shutdown.

“A good baseline expectation for the press conference will be Powell reemphasizing patience and prudence and evaluation of the data as it comes in. There is definitely expectations for the Fed to be dovish,” said Ben Jeffrey, strategist at BMO.