Sept 17 (Reuters) - Euro zone government bond yields

were in a holding pattern on Wednesday ahead of a

widely-expected U.S. Federal Reserve rate cut later in the day,

with focus on any cues on the extent of easing the Fed may

deliver this year.

Germany's 10-year bond yield, the benchmark for

euro zone debt, was a touch lower at around 2.69%. French and

Italian bonds traded in line with their German counterparts

, echoing muted moves in U.S. Treasury

yields.

The 10-year U.S. Treasury yield was little

changed at 4.02% while rate-sensitive 2-year yields

hovered at around 3.51%.

Traders fully price in a 25 basis point cut by the Fed.

Equally important will be commentary from Fed Chair Jerome

Powell and policymakers' updated economic and interest rate

projections.

A dovish surprise from the Fed could prompt U.S. Treasuries

to outperform their German counterparts as investors have pared

expectations of policy easing from the European Central Bank.

Money markets expect the Fed to lower policy rates by nearly

70 bps by the end of 2026 but price in a just about 50% chance

of a 25 bps rate cut by the ECB by the summer of next year,

according to LSEG data.

Elsewhere, data released on Wednesday showed British

inflation held at 3.8% in August, remaining the highest of any

major advanced economy. The Bank of England is slated to deliver

its policy decision on Thursday, alongside Norway's central

bank.

While the BoE is expected to keep policy rates unchanged,

the Norges Bank is expected to lower rates by 25 basis points.

(Reporting by Jaspreet Kalra; Editing by Lincoln Feast.)