LONDON/NEW YORK - Markets around the world tumbled yesterday and the S&P 500 dropped to its lowest level of 2022 as panic mounted that the global economy was going to take a hit.

The decline came after the British pound briefly fell to its weakest level against the U.S. dollar on record, with investors balking at the new British government’s tax cut and spending plans. China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its fall.

The global economy is still fighting to recover from the pandemic and cope with war. A new forecast showed that it was slowing more than expected, prompting one official to say that “the world is paying a very heavy price” for Russia’s invasion.

But countries are also reacting to U.S. policymakers’ decision to fight soaring domestic inflation with aggressive interest rate hikes, which have pumped up the value of the dollar — the go-to currency for much of the world’s trade and transactions. The policy has caused economic turmoil and profound pain across the world, pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

As a reaction to the gloom, In Nigeria and Somalia, where the risk of starvation already lurks, the strong dollar is driving up the price of imported food, fuel and medicine. It is also nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in India and South Korea.