Here's the scenario (Keycloak 16.1.1):

1. New user gets created with "Update Password" required user actions
2. They get sent an email with a link
3. They visit the link and choose their password
4. At the end of this process they get a "Your account has been updated" page with a "back to application" link
5. This link takes them to the login screen where they have to re-authenticate themselves

Is there any way that they can be automatically logged in after step 4? Can this achieved via authentication flows?

It does seem an unnecessary barrier for first time users. It's even more pronounced if you are using 2 factor authentication where the following happens.

1. New user gets created with "Update Password" and "Configure OTP" required user actions
2. They get sent an email with a link
3. They visit the link and set up OTP and enter their authentication code via Google Authenticator or similar
4. In the next step they choose their password
5. At the end of this process they get a "Your account has been updated" page with a "back to application" link
6. This link takes them to the login screen where they have to re-authenticate themselves
7. Now they have to get Google Authenticator out again and enter another OTP code