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Wall Street closes at 2016 high as Fed signals fewer rate hikes

The S&P 500 closed at its highest level of the year on Wednesday after the US Federal Reserve left interest rates untouched and signaled fewer rate hikes in coming months.

The Fed indicated moderate US economic growth and "strong job gains" would allow it to tighten policy this year with fresh projections showing policymakers expected two quarter-point hikes by the year's end, half the number seen in December.

But the US central bank noted the United States continues to face risks from an uncertain global economy.

Because of that uncertainty, "the committee judged it prudent to maintain the current policy stance at this meeting," Fed Chair Janet Yellen said.

The decision to keep rates steady was in line with analyst predictions, but the Fed's tone was surprising to some.

"Most folks were looking for a slightly hawkish statement and they did not deliver in that," said Tom Porcelli, RBC Capital Markets chief U.S. economist. "It was balanced at best and probably even slightly dovish.”

The Dow Jones industrial average closed up 74.23 points, or 0.43 percent, to 17,325.76, the S&P 500 had gained 11.29 points, or 0.56 percent, to 2,027.22 and the Nasdaq Composite had added 35.30 points, or 0.75 percent, to 4,763.97.

European stocks ended little changed on Wednesday, coming off session highs after a report showed US inflation rose more than expected last month, with gains for energy and auto company shares offset by a weaker banking sector.

The pan-European FTSEurofirst 300 index closed up 0.02 percent at 1,341.8 points and euro zone's blue-chip Euro STOXX 50 index fell 0.2 percent, while Britain's FTSE rose on the back of proposals in finance minister George Osborne's annual budget statement.

Japanese stocks fell as investors reduced their holdings ahead of the outcome of the US Federal Reserve's policy meeting, while Sharp Corp tumbled after news that its takeover deal with Foxconn may not be signed this week.

Bank stocks languished after Bank of Japan Governor Haruhiko Kuroda said it was theoretically possible for the central bank to cut interest rates to around minus 0.5 percent, driving the banking sector to the biggest drop on the board.

The Nikkei share average fell 0.8 percent to 16,974.45.

The broader Topix slipped 0.8 percent to 1,360.50 and the JPX-Nikkei Index 400 declined 0.9 percent to 12,291.97.

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