Stock markets sink, dollar jumps

Stock markets around the world sank on Thursday while the dollar rallied after the Federal Reserve warned that US interest rates would go higher than previously expected in its fight against decades-high inflation.

Meanwhile the Bank of England warned that Britain faced a recession set to last until mid-2024.

The Fed on Wednesday unveiled a fourth straight 0.75-percentage-point increase as expected – the sixth hike this year to cool rampant prices.

The dollar rose strongly against the pound on Thursday despite the Bank of England also delivering a 0.75-percentage-point hike – the largest in 33 years – to 3.0 per cent, or the highest rate since 2008.

The pound fell by two per cent against the dollar in afternoon trading.

Norway's central bank raised its policy rate for a fourth consecutive time, with a quarter-point increase that took it to its highest level since 2009 at 2.5 per cent.

European Central Bank president Christine Lagarde flagged more interest rate hikes on Thursday with comments that a "mild" eurozone recession was looming but would not be enough to bring down record-high inflation.

Oil prices also fell heavily on Thursday as aggressive rate hikes increase...