Stocks tumbled on Thursday as investors’ focus returned to the threat of runaway inflation and the economic pain that will come as interest rates rise to levels not seen in over a decade, resuming a downdraft that’s already dragged Wall Street into a bear market.

The S&P 500 fell more than 3 percent by midday, part of a global retreat that saw stocks in Europe also post sharp declines. With Thursday’s decline, the S&P 500 is now more than 23 percent below its Jan. 3 peak and on the verge of logging its worst quarter since 2008, when the economy was devastated by the global financial crisis.

Europe’s Stoxx 600 index fell 2.5 percent, its seventh decline in eight days, while FTSE 100 in London dropped 3.1 percent.

Thursday’s slump came a day after the Federal Reserve announced its largest rate increase in decades, a sign that it was prepared to inflict some economic pain to get inflation under control, with other central banks following suit. The Bank of England announced on Thursday its fifth consecutive interest rate increase, and Switzerland’s central bank raised its interest rate for the first time in 15 years, a more aggressive move than many expected.

The central banks are raising borrowing costs to discourage spending on everything from new homes to car loans, but doing so will also slow the economy and threaten corporate profits.

Already, some interest rates are jumping far more quickly than even the Fed’s policy rate, which is now in a range of 1.50 percent to 1.75 percent, up from near zero in March. Average mortgage rates, for example, have nearly doubled this year, to about 5.8 percent on Thursday, from just over 3 percent. That’s the highest level for 30-year fixed mortgages since 2008, according to Freddie Mac.

Shares of homebuilders, like KB Home and Lennar, have tumbled as a result. On Thursday, they were down 8.5 percent and nearly 7 percent respectively, losses that left both down more than 40 percent lower for the year so far.

And yields on government bonds, which underpin borrowing costs across the economy, are also rising sharply this year as the central bank raises rates. Earlier this week, before the Fed’s announcement, the yield on the 10-year Treasury notes climbed to 3.47 percent, the highest since 2011. On Thursday, it was 3.32 percent, still reflecting levels not seen in more than a decade.

Analysts say the stock market isn’t likely to regain its footing until there are clear signs that inflation is starting to come under control, which in turn would take pressure off the Fed to raise rates quickly. Stocks briefly rallied in late May, ending a seven-week-long losing streak, as data seemed to show that gains in consumer prices had peaked, but the selling began again last week after a new report on the Consumer Price Index showed that inflation accelerated again, jumping 8.6 percent in May from a year earlier.

“Rampant inflation could be an equity market killer,” said Edward Moya, a senior market analyst at OANDA, noting that increased prices for food, energy and housing are a burden on companies and consumers.

Jerome H. Powell, the Fed chair, stressed at a news conference on Wednesday that inducing a recession was not part of the central bank’s plan, but economists are skeptical. Analysts at Deutsche Bank, for example, called the central bank “overly optimistic” in its thinking that it could tame inflation without causing a recession.

“Not until it is clear that the U.S. has seen peak inflation are concerns about the trajectory of Fed hikes likely to ease significantly,” Jane Foley a strategist at Rabobank wrote in an email. “Meanwhile, the market sentiment is likely to remain scarred.”

Revisions to economic forecasts are coming quickly. Economists at IHS Markit, for example, now say U.S. gross domestic product probably grew at a 0.8 percent annual rate in the second quarter. Just last week, they were predicting growth of 2.4 percent.

The concern about the economy was evident outside of the stock market on Thursday, too. Copper prices and oil prices, which historically serve as measures of sentiment about the global economy, were lower on Thursday as well.

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