North American markets sank Thursday, as the U.S. Federal Reserve raised its key interest rate a quarter point and indicated that it wasn’t likely to move off its current policy of measured hikes.

Saying that “pressures on inflation have stayed elevated,” the Fed raised its interest rate to 3.25%, its ninth consecutive increase.

Although the increase was widely expected, investors had been hoping for some suggestion the central bank would ease off its recent trend of tightening monetary policy.

The S&P/TSX composite index finished down 126.56, or 1.26%, to close 9,902.77.

Volume on the senior exchange was 197 million shares.

For the week, the TSX benchmark lost 0.9%.

Nine of the 10 TSX main sub-groups were down, with the heavily weighted financials sector dropping 1.49%.

Bank of Nova Scotia shares fell $1.06, or 2.55%, to $40.54, while TD Bank lost 99¢, or 1.78%, to close $54.64.

The energy group was down 0.92% as the price of crude oil fell 72¢ to settle at US$56.50 .

The information technology group fell 1.7%.

Nortel Networks shares dropped 11¢, or 3$, to $3.19, while Research In Motion dropped $2.73, or nearly 3$, to $90.17, hit by disappointment over growth in BlackBerry subscribers and concern over its legal troubles.

Statistics Canada said Canadian GDP grew by a better-than-expected 0.4% in April, 2.7% on an annualized basis, on the strength of oil and industrial production and solid retail sales.

Bucking the wider trend, the junior S&P/TSX venture exchange managed to advance 11.58, or 0.68%, to close 1,726.83.

On Wall Street, the Dow Jones industrial average was off 99.51, or 0.96, to 10,274.97. The tech-heavy Nasdaq composite index fell 11.93, or 0.58%, to close 2,056.96, while the S&P 500 fell 8.52, or 0.71%, to close 1,191.33.

Canadian markets will be closed Friday for Canada Day, while U.S. markets will book Monday off to celebrate Independence Day.