* Fed on track to raise rates sometime next year

* Energy shares lead gains on S&P 500

* Indexes up: Dow 1.1 pct, S&P 1.3 pct, Nasdaq 1.4 pct (Updates to late afternoon)

By Caroline Valetkevitch

NEW YORK, Dec 17 (Reuters) – U.S. stocks were up more than 1 percent in Wednesday afternoon trading as the Federal Reserve gave an upbeat assessment of the economy and said it would take a patient approach toward lifting interest rates, a view that investors embraced.

Stocks extended sharp gains following the statement but pared some of that increase heading into the close as Fed Chair Janet Yellen commented on policy. The gains follow a three-day streak of losses for the market.

Following a two-day meeting, the U.S. central bank gave a strong signal that it was on track to raise interest rates sometime next year. The statement came against a backdrop of solid domestic economic growth but trouble overseas.

“In my mind there are no big surprises with this announcement and the market, especially given the uncertainty of the past week, no big surprises is a good thing. So it’s a little bit of a sigh of relief,” said Cameron Hinds, regional CIO at Wells Fargo Private Bank in Lincoln, Nebraska.

All 10 S&P sectors were higher, though energy was in the lead by a wide margin. The S&P energy sector, which has fallen sharply with the heavy selloff in oil prices since June, was up 3.6 percent. Shares of Chevron were up 3.7 percent.

At 3:14 p.m., the Dow Jones industrial average rose 181.36 points, or 1.06 percent, to 17,250.23, the S&P 500 gained 25.63 points, or 1.3 percent, to 1,998.37 and the Nasdaq Composite added 65.07 points, or 1.43 percent, to 4,612.91.

Earlier in the day, data showed U.S. consumer prices recorded their biggest drop in nearly six years in November as gasoline prices tumbled.

Shares of the Herzfeld Caribbean Basin Fund hit a seven-year high as President Barack Obama announced a move to normalize relations between the United States and Cuba. The fund, which holds stocks and assets that fund manager Thomas Herzfeld believes would benefit from an eventual end to the U.S. economic embargo against Cuba, was last up 23.4 percent.

Advancing issues outnumbered declining ones on the NYSE by 2,668 to 439, for a 6.08-to-1 ratio; on the Nasdaq, 2,163 issues rose and 576 fell for a 3.76-to-1 ratio. (Additional reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Peter Galloway)