Wall Street stocks slumped on Wednesday after the Federal Reserve kept interest rates unchanged, but signalled it could lift rates again this year.

The Dow Jones Industrial Average finished down 0.2 percent at 34,440.88.

The broad-based S&P 500 shed 0.9 percent to 4,402.20, while the tech-rich Nasdaq Composite Index tumbled 1.5 percent to 13,469.13.

The Fed decision, which was in line with expectations, postpones another immediate painful rise in the cost of mortgages and other loans.

In a press conference, Fed Chair Jerome Powell offered a positive assessment of US consumer health and the labor market, an outlook that keeps alive the chance of averting recession.

But this also likely means that interest rates will remain higher for longer.

Forecasts released by the central bank point to one more rate hike in 2023 and just two interest rate cuts in 2024, down from the prior projection of four cuts next year.

The Fed Chair did not really "lean into the potential for cutting," said Art Hogan from B. Riley Wealth Management.

After 11 interest rate increases since March last year, inflation has fallen sharply but remains above the Fed's long-run target of two percent, keeping pressure on officials to consider further policy action.

"The US economy is too strong and this rate hiking cycle will last a lot longer than Wall Street wants," said Oanda's Edward Moya.

"The Fed is not done with raising interest rates," added Kathy Lien, a foreign exchange expert at BK Traders. "I think there's more rate hikes ahead.