NEW YORK, United States -- Global stocks tumbled Thursday after the US Federal Reserve left interest rates unchanged but indicated that more hikes might be needed to tame inflation -- a signal echoed by other central banks.

Wall Street finished decisively lower, with all three major indices losing more than one percent as worries about a possible US government shutdown added to angst over lofty interest rates.

Far-right members of the House of Representatives have so far blocked key spending bills in Congress, adding to the chance of a government shutdown after midnight on September 30.

Earlier, indices in Europe and Asia also closed firmly in the red.

In a move dubbed a "hawkish hold" by analysts, the Fed held rates at a 22-year high on Wednesday but signaled another hike in 2023 is likely, to tackle US inflation.

Its "dot plot" guide to future rates showed that there could be just two cuts next year, instead of the four previously anticipated.

"The Fed's hawkish hold has caused a bit of a wobble in the markets but I'm not convinced the central bank is as serious about another rate hike as it is claiming," Craig Erlam, analyst at trading platform OANDA, told AFP.

"Investors are wary of the central bank tipping the economy over the edge which is why we are seeing a sea of red today," he said.

The Bank of England also decided to freeze its key rate on Thursday, holding it at 5.25 percent following 14 hikes -- the highest level in more than 15 years.

The London stock market reversed its losses immediately after the BoE decision but sank back into the red, while the British pound was sent off a cliff to a six-month low of $1.2234 before clawing back to around $1.23.

The BoE's Monetary Policy Committee was divided, voting 5-4 to pause the monetary tightening cycle a day after data showed a surprise drop in UK inflation in August.

"Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures," the BoE said.

Fawad Razaqzada, market analyst at City Index and Forex.com, said the BoE "decided to err on the side of caution."

"Clearly, the BoE is worried about the economic performance of the nation, which has been quite shocking," he added.

Elsewhere, the Swedish and Norwegian central banks each raised their key interest rates by a quarter-point, saying inflation remained too high.

The Swiss National Bank unexpectedly left its rate unchanged, confounding expectations for an increase.

All three central banks cautioned that more hikes may be necessary, with Norwegian policymakers saying they were "likely" to increase rates again in December.

Attention will turn Friday to the Bank of Japan, with officials recently saying they were keeping a close watch on foreign exchange markets, fueling speculation they would intervene to protect the yen if it continued to weaken.

- Key figures around 2030 GMT -

New York - Dow: DOWN 1.1 percent at 34,070.42 (close)

New York - S&P 500: DOWN 1.6 percent at 4,330.00 (close)

New York - Nasdaq: DOWN 1.8 percent at 13,223.98 (close)

London - FTSE 100: DOWN 0.7 percent at 7,678.62 (close)

Frankfurt - DAX: DOWN 1.3 percent at 15,571.86 (close)

Paris - CAC 40: DOWN 1.6 percent at 7,213.90 (close)

EURO STOXX 50: DOWN 1.5 percent at 4,212.59 (close)

Tokyo - Nikkei 225: DOWN 1.4 percent at 32,571.03 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 17,655.41 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,084.70 (close)

Euro/dollar: FLAT at $1.0661 on Wednesday

Pound/dollar: DOWN at $1.2292 from $1.2344

Dollar/yen: DOWN at 147.57 yen from 148.34 yen

Euro/pound: UP at 86.71 pence from 86.36 pence

Brent North Sea crude: DOWN 0.2 percent at $93.30 per barrel

West Texas Intermediate: FLAT at $89.63 per barrel