The US Federal Reserve on Wednesday decided to maintain its target range for the federal funds rate at 3.5-3.75%, in line with market expectations.

"Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated," said the Federal Open Market Committee (FOMC) in a statement.

Nevertheless, "uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the US economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate," the statement said.

In the statement, the FOMC reiterated its strong commitment to supporting maximum employment and returning inflation to its 2% objective.

Of the 12 FOMC members, 11 voted for keeping the rate unchanged.

Addressing a press conference after the meeting, Fed Chair Jerome Powell said that surging oil prices due to the conflict in the Middle East are expected to increase inflation in the near term. "In the near term, higher energy prices will push up overall inflation."

Powell admitted that it is too soon to know the scope and duration of the potential effects of the conflict on the economy. "We're in a difficult situation."

Nonetheless, Powell refused to use word "stagflation" to describe the U.S. economy. "I would reserve the term stagflation for a much more serious set of circumstances."

The Fed projects that inflation will ease this year, but the progress will not be as much as "we had hoped," said Powell.

On the Fed's economic projections of two more rate cuts this year, Powell said that could change if inflation remains stubborn, reiterating that the Fed's monetary policy is not following a fixed path. "We'll make our decisions on a meeting by meeting basis."

Following the Fed's decision to further keep rates unchanged, US stock prices slid to session lows, the US dollar index rose and gold kept slipping to below 4,900 dollars per ounce.

With the inflation forecast revised to 2.7% from 2.5% in the Economic Projections, the Fed's decision to leave rates unchanged was expected, said Art Hogan, chief market strategist at B. Riley Wealth Management.

"The war's impact on energy markets has lifted inflation expectations at a time when central banks were already cautious about easing," said Ole Hansen, head of commodity strategy at Saxo Bank. "The surge in oil and refined product prices has reduced the likelihood of near-term rate cuts and, in some cases, pushed market pricing toward a 'higher-for-longer' rate outlook."

The Federal Reserve is in a "wait and see" mode, awaiting clarity on the Iran conflict developments, said Lindsay Rosner, head of multi-sector fixed income investing at Goldman Sachs Asset Management. But she said she still expects two more rate cuts this year, with timing dependent on the length of the conflict.

The FOMC holds eight meetings per year to discuss monetary policy and the federal funds rate, but can also convene unscheduled meetings if necessary to review economic and financial developments.

US President Donald Trump on Monday urged Powell to call a special meeting and lower interest rates "immediately, not waiting for the next meeting."