US STOCKS-Wall Street dips as Fed officials project rate hikes for 2023

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window.)

* Adds closing prices (New throughout, adds market reaction to Fed statement)

By David French

June 16 (Reuters) - The three main Wall Street indexes all fell on Wednesday, as U.S. Federal Reserve officials unnerved investors with indications that they are projecting interest rate hikes for 2023, which was earlier than investors had expected.

New projections saw a majority of 11 of 18 U.S. central bank officials pencil in at least two quarter-percentage-point rate increases for 2023. At the same time, officials pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

The Fed cited an improved economic outlook, with overall economic growth expected to hit 7% this year.

With inflation rising faster than expected and the economy bouncing back quickly, the market had been looking for clues of when the Fed may alter the policies put into place last year to combat the economic fallout from the pandemic, including a massive bond-buying program.

The Fed reiterated its promise to await "substantial further progress" before beginning to shift to policies tuned to a fully open economy. It also held its benchmark short-term interest rate near zero and said it will continue to buy $120 billion in bonds each month to fuel the economic recovery.

However, investors interrepted the Fed's comments on rates as more hawkish than before.

"At first blush, the dot plot which projected two hikes by 2023 was more hawkish than expected, and markets reacted as such," said Daniel Ahn, chief U.S. economist at BNP Paribas.

Unofficially, the Dow Jones Industrial Average fell 264.41 points, or 0.77%, to 34,034.92, the S&P 500 lost 22.83 points, or 0.54%, to 4,223.76 and the Nasdaq Composite dropped 33.17 points, or 0.24%, to 14,039.68. (Reporting by Shashank Nayar and Medha Singh in Bengaluru and David French in New York; Editing by David Gregorio, Marguerita Choy and Matthew Lewis)

Copyright © Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.