Global stocks fell after a large group of central banks raised interest rates and warned of further hikes to come in the fight to tame inflation.

The benchmark S&P 500 fell 2.5% on Thursday, its biggest daily loss since early November, following hawkish interest rate warnings from central banks in the US, UK, in Europe and Switzerland over the past day. The tech-heavy Nasdaq Composite fell 3.2%, also its biggest loss since November. In Europe, the broad Stoxx 600 fell 2.8%, its biggest loss since May.

The US Federal Reserve, European Central Bank and Bank of England all slowed the pace of interest rate hikes this week, opting for hikes of 0.5 percentage points. But investors were rattled by the hawkish tone of the meetings, including comments from the ECB that “inflation remains far too high” and that rates would continue to rise by 0.5 percentage points “for some time to come. “.

On Wednesday, the Fed ended a streak of four straight increases of 0.75 percentage points, bringing the fed funds rate down to a target range of between 4.25% and 4.5%. However, Fed Chairman Jay Powell said, “It will take a lot more evidence to say that inflation is on a sustained downward path.”

The Fed also released its quarterly projections on the state of interest rates, inflation, unemployment and GDP in the coming years. The central bank currently expects interest rates to be at 5.1% at the end of 2023, suggesting the Fed will keep rates high even as recession risk increases.

The mix of gloomy Fed predictions and slowing interest rate hikes left some frustrated. “Either you think your political stance is ‘not restrictive enough’ or you think it is close enough that a [0.25 percentage point] a hike is on the table for February,” said Steve Blitz, chief US economist at TS Lombard. “You can’t believe both.”

Seema Shah, chief global strategist at Principal Asset Management, said the market “still doesn’t seem to buy into the idea that the Fed won’t cut rates until 2023 – there’s something about [Powell’s] message that does not quite resonate”.

Sentiment was further undermined by weak economic data, adding to fears of an impending recession. The U.S. Commerce Department reported a 0.6% month-on-month drop in retail sales in November, the biggest drop in 11 months. The drop was larger than the 0.1% decline predicted by economists polled by Reuters. US industrial production fell 0.2% in November.

Both sets of data indicate that the U.S. economy “has lost some serious momentum as consumer resistance to much higher interest rates is starting to crumble,” said Andrew Hunter, senior U.S. economist at Capital Economics.

Other data showed that 211,000 Americans applied for unemployment assistance last week. It was less than the previous seven-day period and lower than economists forecast, a sign that the tight domestic labor market could keep inflation high for longer.

The FTSE 100 fell 0.9% as the BoE raised its rate to 3.5% while warning that further rate hikes were likely. The pound slid 1.9% against the dollar to $1.22, down from a six-month high.

The euro traded down 0.4% against the dollar at $1.06, erasing earlier gains.

The yield on two-year German government bonds, which moves with rate expectations, hit its highest level since 2008, rising 0.05 percentage point to 2.42%.

In the Treasury market, the 10-year yield, which moves with growth and inflation expectations, fell 0.06 percentage points to 3.45%. The two-year Treasury yield fell 0.01 percentage point to 4.24%.

Asian markets followed US stocks lower, with Hong Kong’s Hang Seng index down 1.6%, while Japan’s Topix lost 0.2% and China’s CSI 300 traded flat.