The Federal Reserve placed financial markets - which have relied on its cheap stimulus cash for almost two years - on notice that interest rates were likely to start rising in a sustained fashion from March.

It also reaffirmed that its bond purchase programme was to end that month as attention turns from COVID support to taming inflation instead.

US inflation, at 7% in December, is at its highest level for 40 years.

Analysts said what had spooked markets was the strength of the Fed's remarks - with Fed funds futures, which track short-term rate expectations, now pricing in more than 4 rate increases this year.

While US markets had little time to react following the conclusion of Fed chair Jay Powell's news conference on Wednesday, futures were down by more than 1.5% on Thursday.

Stocks plunged in Asia overnight to a 15-month low and European markets were tipped to slide by 3% at the open.