NEW YORK, June 18 (Reuters) - The three major U.S. stock indexes briefly added to gains in volatile trade on Wednesday after the Federal Reserve left interest rates unchanged and signaled borrowing costs were still likely to fall this year, but slowed the overall pace of expected future rate cuts.
While policymakers still anticipate cutting rates by half a percentage point this year, they slightly slowed the pace from there to a single quarter-percentage-point cut in each of 2026 and 2027, based on the Fed's statement. Policymakers estimated that President Donald Trump's tariffs would stoke inflation.
“The Fed is looking at slower economic growth and the vote was unanimous and the fact that rates remain unchanged is no surprise,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Investors also have been closely watching developments in the Middle East, with some concerned about the possibility of a more direct U.S. military involvement in the Israel-Iran aerial war.
Iranian Supreme Leader Ayatollah Ali Khamenei rejected Trump's demand for unconditional surrender. Trump said his patience had run out, though he gave no clue about what his next step would be.
Immediately after the Fed's statement, the indexes added to gains but then returned to levels seen just before the news. At 2:14 p.m. the Dow Jones Industrial Average (.DJI), rose 124.01 points, or 0.29%, to 42,339.81, the S&P 500 (.SPX), gained 17.02 points, or 0.28%, to 5,999.74 and the Nasdaq Composite (.IXIC), gained 71.45 points, or 0.37%, to 19,592.54.
Earlier in the day, initial jobless claims data on Wednesday showed the number of Americans filing new applications for unemployment benefits fell last week, but stayed at levels consistent with a further loss of labor market momentum in June.
Advancing issues outnumbered decliners by a 2.27-to-1 ratio on the NYSE. There were 85 new highs and 45 new lows on the NYSE.
On the Nasdaq, 2,803 stocks rose and 1,561 fell as advancing issues outnumbered decliners by a 1.8-to-1 ratio.
Additional reporting by Kanchana Chakravarty and Sukriti Gupta in Bengaluru; Editing by Shinjini Ganguli and David Gregorio
