Global equity markets fell on Friday as investors digested the Federal Reserve's surprise decision to raise its benchmark interest rate, the first increase in three years. The S&P 500 and Nasdaq extended losses at the open, following declines in London, Frankfurt and Tokyo overnight.

The Federal Open Market Committee lifted the federal funds rate by a quarter point on Wednesday, citing persistent inflation that reached 3.4% in August. The move directly contradicted President Donald Trump's repeated public demands for lower borrowing costs, deepening tensions between the White House and the central bank.

Rate-sensitive technology and growth shares led the retreat. Yields on 10-year US Treasury notes climbed as traders repriced expectations for policy through 2027.

Analysts at Goldman Sachs and Morgan Stanley revised their forecasts, with several warning that further tightening remained possible if energy-driven inflation persisted. The dollar strengthened against the euro and yen, adding pressure to emerging-market currencies and commodity prices.

A European Central Bank spokesperson said policymakers were monitoring the spillover effects but signalled no immediate change to their own stance. Fed Chair Jerome Powell defended the decision, telling reporters after the meeting that the committee acted "to safeguard price stability against renewed inflationary pressure" and would remain "data-dependent" at coming meetings.