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Global stocks and emerging market currencies sank on Thursday after the US Federal Reserve indicated it would cut interest rates more slowly next year to guard against any new threat of inflation.

The quarter-point cut in rates the Fed delivered on Wednesday, at its last meeting before President-elect Donald Trump next month, was overshadowed as officials scaled back planned cuts through 2025. .

Signs that the Fed remains concerned about lingering inflation sent European and Asian stocks lower, after a sharp sell-off on Wall Street on Wednesday, as investors dreaded the prospect of the Fed tapering at the cost of borrowing less quickly.

Europe’s benchmark Stoxx 600 fell 1.5 percent and the FTSE 100 lost 1.4 percent on Thursday after markets in India, Japan, Korea and Hong Kong closed in the red.

Meanwhile, the dollar index, a gauge of the US currency against six peers, is trading at its highest level since November 2022.

The Indian rupee fell to a record low of Rs85.1 against the dollar. The Chinese renminbi fell, while South Korea’s winnings fell to a 15-year low. The Brazilian real lost 2.9 percent.

“Background rates from the US Fed will put more pressure on emerging markets,” said Robin Gilhooly, senior emerging market economist at Abrdn. “It’s been a tough start to next year for emerging markets . . . but the contours of US policy won’t be clear for a while.”

Concerns about inflation sticking above 2 percent contributed to Fed officials forecasting half a percentage point worth of cuts in 2025, down from a full percentage point in their last estimates in September .

In quick trading late Wednesday, the S&P 500 index closed up 2.9 percent and the tech-heavy Nasdaq Composite fell 3.6 percent. Many of the biggest winners of a powerful 2024 equities rally have pulled back.

In bond markets, the yield on the benchmark 10-year Treasury rose another 0.04 percentage points to 4.54 percent. The rate-sensitive two-year yield fell 0.03 percentage points to 4.33 percent after rising 0.11 percentage points.

“The narrative shifted from inflation to slowing and downside risks to growth, to the Fed acknowledging that the economy is in a ‘very good place’ and seriously questioning how many more rate hikes are necessary. cut after all,” said Chris Turner, global head of markets at ING.

Across Asian equity markets, Australia’s S&P/ASX 200 fell 1.7 percent, South Korea’s Kospi closed down 2 percent and India’s Sensex weakened 1.2 percent.

Meanwhile, Japan’s currency-sensitive Nikkei 225 index fell 0.7 percent after the Bank of Japan opted to stay consistent on Thursday.

“Markets were surprised by the Fed’s perceived hawkishness,” said Mitul Kotecha, head of emerging market macro strategy at Barclays in Singapore.

Bitcoin, which fell more than 5 percent on Wednesday, gained 1.6 percent to $102,502 on Thursday.

“Given the risk of rising inflation from potential trade tariffs and a slowdown in immigration cooling pressure on the labor market, market expectations of just two more cuts in 2025 now seem reasonable”, said Jean Boivin, head of the BlackRock Investment Institute.