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By Pete Schroeder

WASHINGTON - Stocks fell after the U.S. Federal Reserve brought forward its projections for interest rate hikes, driving up U.S. Treasury yields and the dollar.

The Fed revealed it now expected its first post-pandemic interest rate hike to come in 2023, citing an improved health situation amid the vaccine rollout. Projections showed a majority of Fed officials anticipating at least two quarter-point rate increases in 2023, although the Fed said it would keep policy supportive for now to boost employment.

"The central case growth and inflation expectations for the next couple of years have not changed by much since March, but there is  an explicit recognition that the vaccination program has reduced the risks to the economy from the health crisis," said Brian Coulton, chief economist at Fitch Ratings.

"Against that backdrop the projections show that the Fed will have achieved both its inflation and maximum employment goals by 2023, warranting a start to interest rate normalization."

Markets dipped immediately following the statement, after investors had kept them wavering around record highs all week. Wednesday's policy update from the Fed was highly anticipated as it was its first since new data showed inflation beginning to appear amid the economic comeback.

The MSCI world equity index, which tracks shares in 45 nations, fell 4.39 points or 0.61%. The Dow Jones Industrial Average fell 217.13 points, or 0.63, the S&P 500 lost 0.55%, to 4,223.19 and the Nasdaq Composite 0.5%.

TREASURY YIELDS, DOLLAR JUMP

The benchmark 10-year Treasury yield jumped on the statement, rising to 1.5278%. The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.402 points or 0.44%, its highest level since May 7.

Safe-haven gold also took a hit on the Fed news, with spot gold prices falling 1.24% to $1,835.56 an ounce. And oil prices stepped back from earlier gains in the day, with Brent crude last up 6 cents at $74.05 a barrel. U.S. crude was last down 32 cents to $71.80 per barrel.

(Editing by Timothy Heritage, Chizu Nomiyama, Barbara Lewis and Cynthia Osterman)