The FTSE 100 was down 0.8 percent with the mid-cap index <.FTMC> 0.9 percent lower, after hitting multi-year lows in early trading.

In result-driven moves, Carnival tanked 10.8 percent to the bottom of the main index after the world's largest cruise operator forecast an adjusted profit for the first quarter that missed market expectations.

Oil heavyweights Shell and BP were the biggest drags on the main index, as crude prices slipped back into negative territory.

Utilities, often seen as a safe haven, helped the main index recoup some losses. National Grid was up 2.4 percent after a rating upgrade by CFRA, with Severn Trent and United Utilities also rising.

But the UK indices are on track for their worst year since the 2008 financial crisis, and the Fed's tone deepened concerns already augmented by Brexit worries.

Despite calls by U.S. President Donald Trump for the Fed to stop raising interest rates, the central bank on Wednesday stuck by a plan to keep repealing support from an economy it views as strong, sending Wall Street spiralling down.

The Fed news and falling greenback hit mining stocks, with Antofagasta, BHP Group, Rio Tinto and Anglo American all down between 2 percent and 3.7 percent.

"The outlook has changed, for ten years we have been talking about buying the dip. The mentality is different now, it is sell the rally," said CMC Markets analyst Michael Hewson.

"My fear is that the Fed is ignoring the clouds of concern around the global economy and happily putting on sun cream when there is a shower just around the corner."

Back at home, the Bank of England kept interest rates unchanged on Thursday but trimmed its economic growth forecast for the last quarter of the year, acknowledging that Brexit uncertainty had "intensified considerably" over the last month.

After starting the week with a profit warning from online fashion store ASOS that shook retail stocks, the shopping sector saw some good news as British retail sales topped expectations in November thanks to Black Friday promotions.

Among mid-caps, construction firm Kier Group eked out a 1.6-percent gain, having earlier fallen 13 percent after saying that less than half of its shares were bought by shareholders in a fundraising. Still, its market value has shrunk over 64 percent this year.

Investors have dumped shares in the construction sector amid worries about mounting debts after Carillion collapse and the impact of Brexit on real estate.

"After Carillion, everyone wants to kill these types of names," said a trader.

Defying the overall sentiment, sandwich maker Greencore Group was the top mid-cap gainer with a 7.2 percent surge after announcing plans to buy back 509 million pounds of shares at a double-digit premium.

AIM-listed electricity and gas supplier Yu Group slumped 14.7 percent after it admitted to serious historical failures in an accounting review and said its profit would be hit as a result.

(Reporting by Muvija M and Shashwat Awasthi in Bengaluru, additional reporting by Helen Reid in London; editing by Josephine Mason)

By Muvija M and Shashwat Awasthi