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Fed keeps rates unchanged as widely expected

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Central bank to taper drawdown of its balance sheet

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Indexes up: Dow 0.55%, S&P 500 0.82%, Nasdaq 1.18%

(Updates with Federal Reserve policy statement)

By Chuck Mikolajczak

NEW YORK, March 19 (Reuters) -

U.S. stocks added to gains on Wednesday after the Federal

Reserve kept rates unchanged, as the central bank and investors

continue to assess how President Donald Trump's tariff policies

might affect economic growth.

The central bank kept its benchmark overnight interest rate

unchanged in the 4.25%-4.50% range, and indicated that two

quarter-point interest-rate cuts were likely later this year,

the same median forecast as three months ago. The Fed also

forecast slower economic growth and higher inflation.

There was substantial disagreement among policymakers

about the appropriate path of policy, pointing to uncertainty

among members over how to handle the effects of the Trump

administration's policies.

The Fed also said it

would reduce

the pace of the drawdown of its still-massive balance

sheet, as it faces challenges in assessing market liquidity

during an ongoing impasse in the U.S. Congress over lifting the

government's borrowing limit.

"Given growing worries around tariffs and how they could

affect U.S. growth and inflation," Matthias Scheiber, head of

the multi-asset solutions team at Allspring Global Investments

in London said the Fed "took a widely expected 'wait and see'

approach on rates."

Scheiber added: "For 2025, the interest rate market

currently expects the Fed will cut rates to around 3.75% by

year-end. A lot will depend on how the inflation-versus-growth

trade-off develops-growth may continue weakening, and the Fed

may need to cut rates more forcefully than expected."

Traders still see the Fed lowering borrowing costs by at

least two 25-basis point cuts by December, with a 62.2% chance

for a cut of at least 25 basis points in June, according to data

compiled by LSEG.

Investors will now look to comments from Fed Chair Jerome

Powell for further guidance on monetary policy.

The Dow Jones Industrial Average rose 228.44 points,

or 0.55%, to 41,808.20, the S&P 500 gained 46.76 points,

or 0.82%, to 5,660.52 and the Nasdaq Composite gained

213.23 points, or 1.18%, to 17,715.71.

Advancing issues outnumbered decliners for a 1.63-to-1 ratio

on the NYSE and a 1.66-to-1 ratio on the Nasdaq.

The S&P 500 posted four new 52-week highs and one new low,

while the Nasdaq Composite recorded 25 new highs and 103 new

lows.