PRECIOUS-Gold rises more than 1 percent after Fed hikes rates

* Fed hikes interest rates

* Fed forecasts at least 2 more rate hikes in 2018

* Fed says inflation should increase

* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl

(Updates prices; adds comment on Fed rate decision) NEW YORK/LONDON, March 21 (Reuters) - Gold rose more than 1 percent from a three-week low on Wednesday as the U.S. dollar eased after the U.S. Federal Reserve increased interest rates and forecast at least two more hikes for 2018. In its first policy meeting under new Fed chief Jerome Powell, the U.S. central bank said inflation should move higher amid a stronger economy after years below its 2 percent target.

"The economic outlook has strengthened in recent months," the Fed said in a statement at the end of a two-day meeting in which it lifted its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.50 percent to 1.75 percent. Inflation "is expected to move up in coming months and stabilize" around the Fed's target, it said.

Spot gold rose 1 percent at $1,324.04 per ounce by

2:33 p.m. EST (18:33 GMT), earlier hitting $1,327.80, its highest since March 15. Bullion had dropped as low as $1,306.91 in the previous session.

U.S. gold futures for April delivery settled up

$9.60, or 0.7 percent, at $1,321.50 per ounce.

The dollar index , slipped against a basket of

currencies. A weaker greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies. "For 2018 we didn't get what a lot of people whispered -four rate hikes - but that was balanced by the rate hike in 2019 and 2020," said Trey Reik, senior portfolio manager of Sprott Asset Management. He was referring to the fact that the Fed said it also intended to raise rates in 2019 and 2020. Gold is expected to rise to the $1,350-$1,400 level, according to George Milling-Stanley, head of gold strategy at State Street Global Advisors. "The real gains will come in the next month," he said. Expectations for a faster pace of U.S. rate hikes have caused gold to fall more than 3 percent from a 1-1/2 year high reached in January. Higher U.S. interest rates typically reduce demand for non-yielding bullion, though analysts said that the possibility of an escalation in geopolitical tensions could cushion gold. U.S. President Donald Trump is expected to unveil up to $60 billion in import duties on Chinese goods by Friday, following on from tariffs he has imposed on steel and aluminum.

Investors are worried that Trump's actions could escalate into a trade war if China and other countries retaliate, threatening global growth.

Among other precious metals, silver added 1.8 percent

at $16.47 an ounce, surpassing a six-day high.

Platinum increased 1.2 percent at $951.50 per ounce and palladium rose 1.3 percent to $991.10 per ounce.

(Additional reporting by Eileen Soreng and Nallur Sethuraman in Bengaluru Editing by Rosalba O'Brien and Tom Brown)