Australian shares slumped on Thursday, dragged down by heavyweight mining and financial stocks, as the U.S. Federal Reserve’s hawkish outlook on interest rates dented sentiment.

The S&P/ASX 200 index ended 1.2% lower at 7,163.4 points, in its worst session since June 23.

The minutes of the Fed’s policy meeting in June showed that while almost all officials agreed to hold rates steady, the vast majority foresaw the need to eventually tighten further.

Australian shares slip as heavyweight financials drag

The Reserve Bank of Australia is likely to hike rates by 25 basis points on Aug. 1, following a pause in its previous meeting, a snap Reuters poll showed. But economists were split on when and where the cost of borrowing would peak.

With refreshed RBA forecasts due next month, inflation and labour market updates still highlighting the risk of higher inflation, the case for an August rate hike is strong, Matthew Hassan, a senior economist at Westpac, said in a note.

Australian miners slipped 2.0% as iron ore prices fell after China’s top steel-producing city of Tangshan ordered an output cut for July.

BHP Group and Rio Tinto dropped 2.3% and 1.4%, respectively.

Financials retreated 1.5%, with the “Big Four” banks falling between 1.3% and 2.1%.

Weak oil prices weighed on energy stocks, which slid 1.2%.

Among individual stocks, baby formula maker Bubs Australia dropped 2.2% on plans to reduce operating expenses and cash burn.

New Zealand’s benchmark S&P/NZX 50 index closed 0.4% lower at 11,959.330 points.

The Reserve Bank of New Zealand is scheduled to review its monetary policy next week, with UBS expecting the central bank to keep the cash rate on hold in 2023, at a peak of 5.5%.

“We think the bar for the RBNZ to turn hawkish again, and effectively re-start their hiking cycle, is high.”