Wall Street cuts gains after Fed sees rising inflation

By Caroline Valetkevitch

(Reuters) - U.S. stocks gave up earlier gains to trade flat on Wednesday after the Federal Reserve said it sees inflation rising this year, signalling it remains on track to boost interest rates again in March.

The Fed kept rates unchanged but, in a statement following its two-day policy meeting, it repeated that it expected that "further gradual" rate hikes will be warranted.

"They're more confident in their expectations of rising inflation," said Kevin Logan, Chief U.S. Economist at HSBC Securities in New York.

The central bank raised rates three times last year and sees three more hikes in 2018 even as it continues to trim its balance sheet on a largely pre-set schedule.

"The Fed's acknowledgment of the quickening pace of inflation today put three hikes in 2018 into the 'base-case' and perhaps raises the prospects for a fourth," said Mike Terwilliger, portfolio manager, Resource Credit Income Fund.

Stocks had been higher in earlier trading, lifted by a surge in Boeing that helped lead Wall Street out of a two-day slump on Wednesday.

At 2:27 p.m. ET, the Dow Jones Industrial Average rose 77.9 points, or 0.3 percent, to 26,154.79, the S&P 500 gained 0.15 points, or 0.01 percent, to 2,822.58 and the Nasdaq Composite added 8.81 points, or 0.12 percent, to 7,411.29.

Boeing surged to record high after the planemaker's full-year profit forecast easily topped estimates.

Advancing issues outnumbered declining ones on the NYSE by a 1.06-to-1 ratio; on Nasdaq, a 1.27-to-1 ratio favoured decliners.

The S&P 500 posted 33 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 78 new highs and 41 new lows.

(Additional reporting by Tanya Agrawal in Bengaluru, Herb Lash and Lewis Krauskopf in New York; Editing by Savio D'Souza and Nick Zieminski)