The US Federal Reserve does not expect to raise interest rates for the rest of 2019 amid slower economic growth.
The Fed also said it would ease back on its sell-off of its bond holdings by lowering its monthly cap from $US30 billion to $US15 billion.
The Fed formally adopted its 2 percent inflation goal in 2012, and price gains have mostly come in on the low side since then.
"It may be some time before the outlook for jobs and inflation calls clearly for a change in policy", Federal Reserve Chairman Jerome Powell told reporters following the announcement.
In terms of interest rates, the new Fed projections knocked the number of hikes expected this year to zero from the two forecast in December, completing a pivot to a less aggressive policy in the face of an apparent jump in economic risks.
The shift meant nine of the 17 members of the policy-setting Federal Open Market Committee lowered their projection for this year.
Bank stocks fell broadly along with rates, with the S&P 500 financials sector down more than 2 percent, weighing on the market.
But JPMorgan Chase chief economist Anthony Chan told FOX Business he is predicting the US economy may not be as strong in 2019 compared to 2018 given some weakness in economic forces. They see that end date as most likely in the fourth quarter, at which point the Fed's balance sheet will be around US$3.5 trillion compared with its post-crisis peak of US$4.5 trillion. USA stocks recorded their steepest December losses since the Great Depression as President Donald Trump publicly hammered Powell to stop raising rates and investors saw the Fed's projected hikes as a policy mistake.
"It definitely skewed on the dovish side of expectations", said Evan Brown, head of macro asset allocation strategy at UBS Asset Management in NY.
Greg McBride, chief financial analyst at Bankrate.com, said the US economy is still performing better than others around the globe.
Besides the Fed, gold traders are also reacting to renewed fears over U.S.
Expectations for an interest-rate hike this year have fallen below those for a cut. "It's a great time for us to be patient". That sent bond yields down to the lowest they've been in more than a year.
The US currency, measured against a basket of rivals, has weakened 1.3 per cent in the last 10 days.
The pound closed the session down 0.54 percent at $1.3195, but that was not enough to lift the dollar index after the dovish Fed statement.
Policymakers highlighted February's sluggish pace of hiring - only 20,000 jobs were added - as well as a slowdown in household spending and business investment.
Stocks slip in early trading as investors await the latest policy directive from the FOMC at 2 p.m. ET and Fed Chair Powell's follow-up press conference; Dow -0.4%, S&P -0.2%, Nasdaq -0.1%.
The rate projections in an updated dot plot, along with other economic forecasts, will be released with the committee's statement.
Some analysts say they think the Fed won't raise rates at all this year if the outlook becomes as dim as they are forecasting.
That reflects a slow start to 2019, with the Atlanta Fed's tracking estimate of growth at less than 1 per cent, as well as continuing headwinds, from a battle over trade tariffs and the delayed impact of past rate hikes. The two-year Treasury yield, which is more influenced by Fed movements, fell to 2.39 percent from 2.45 percent late Tuesday.