* Fed leaves rates unchanged, lowers economic growth forecast
* May producer price index up 0.4 pct vs est 0.3 pct
* Indexes up: Dow 0.29 pct, S&P 0.28 pct, Nasdaq 0.25 pct (Updates with post-Fed trading, comment from strategist)
By Noel Randewich
June 15 (Reuters) - Wall Street maintained gains on Wednesday after the Federal Reserve left its key interest rate unchanged, as expected, but signaled it still plans two rate increases this year.
The U.S. central bank also lowered its economic growth forecasts for 2016 and 2017 and indicated it would be less aggressive in tightening monetary policy after the end of this year.
While traders had discounted a rate increase this month by the Fed’s Federal Open Market Committee, or FOMC, they have been eager for clues about the health of the economy and the trajectory of future hikes.
Investors have become more nervous ahead of a vote in Britain next week on whether to leave the European Union, with recent opinion polls indicating growing support for such a move.
The S&P 500 was poised to close higher following four straight sessions of losses caused in part by worries that a fractured European Union could critically damage an already shaky global economy.
“This is an FOMC announcement that really speaks to a global weakness and the bottom line is it underscores the fact the U.S. is not an island and the global markets and economy are more interconnected than they have ever been,” said Peter Kenny, Senior Market Strategist at Global Markets Advisory Group in Berkeley Heights, New Jersey.
The CBOE market volatility index, Wall Street’s “fear gauge”, was down 5 percent for the day but was still at elevated levels not seen in over three months.
At 2:26 p.m. (1826 GMT), the Dow Jones industrial average was up 0.29 percent to 17,726.87 and the S&P 500 had gained 0.28 percent to 2,081.05.
The Nasdaq Composite added 0.25 percent to 4,855.62.
Eight of the 10 major S&P sectors were higher, led by the materials index, up 0.9 percent.
General Electric rose 1.11 percent and provided the biggest boost to the S&P 500.
Advancing issues outnumbered decliners on the NYSE by 2,203 to 776. On the Nasdaq, 1,802 issues rose and 977 fell.
The S&P 500 index showed 12 new 52-week highs and one new low, while the Nasdaq recorded 32 new highs and 33 new lows. (Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by James Dalgleish)