Money-market traders are betting on the steepest Fed tightening in almost three decades after Fed Governor Lael Brainard said the U.S. central bank would start trimming its balance sheets rapidly as soon as May.

“The Fed is going to have to tighten financial conditions enough to push up the unemployment rate and when the Fed has done that in the past, it has always resulted in a recession,” William Dudley, former New York Federal Reserve president, said on Bloomberg TV. “That’s not their intention. They’ll go for a soft landing, but the chances of pulling off are very, very low.”

The Stoxx Europe 600 index headed for its biggest drop in a month, with tech and carmakers leading the decline. WTI crude fluctuated around $102 a barrel. And Twitter Inc., Microsoft Corp. and Apple Inc. were among the worst performers in U.S. trading.

The losses came as Fed meeting minutes, due later Wednesday, are expected to provide clues about the pace of both interest-rate hikes and so-called quantitative tightening, the process of shrinking the central bank’s bond holdings.

Traders are betting the Fed will implement 225 basis points of rate hikes by the end of the year, adding to the 25 basis points already delivered in March. The central bank hasn’t tightened that much in one year since 1994, a famously brutal year for bond investors that even included a 75 basis-point hike.

“The Fed is going to be very aggressive going forward even if it has a negative impact on economic growth and the stock market,” Matt Maley, chief market strategist at Miller Tabak + Co., wrote in a note. “If the Fed does indeed feel the need to change course before they hike rates that many times, the stock market will be a lot lower and so will the bond market. Put another way, by the time the Fed reacts, the markets will have already felt a lot of pain.”

Russia’s growing isolation over the war in Ukraine may also further disrupt commodity flows, putting pressure on prices. Fresh sanctions on Moscow are expected. Meanwhile, Russia’s finance ministry said a Eurobond payment was sent in rubles after foreign banks declined to process coupon payments, raising the specter of a technical default.

“The Ukraine crisis is nowhere near to being resolved,” Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets LLC, said on Bloomberg TV. “And then we’re heading into earnings season. Volatility levels are probably too low and will start to pick up.”

• Where is the dollar headed next? How will the composition of FX reserves change? Those are the themes of this week’s MLIV survey. Please click here to participate.

Key events to watch this week:

• Federal Reserve minutes Wednesday
• EIA crude oil inventory report Wednesday
• St. Louis Fed’s James Bullard, Atlanta Fed’s Raphael Bostic, Chicago Fed’s Charles Evans speak at separate events Thursday
• Reserve Bank of India rate decision Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.2% as of 10:26 a.m. New York time
• The Nasdaq 100 fell 2.3%
• The Dow Jones Industrial Average fell 0.7%
• The Stoxx Europe 600 fell 1.9%
• The MSCI World index fell 1.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0913
• The British pound was little changed at $1.3080
• The Japanese yen fell 0.2% to 123.85 per dollar

Bonds

• The yield on 10-year Treasuries advanced six basis points to 2.61%
• Germany’s 10-year yield advanced four basis points to 0.66%
• Britain’s 10-year yield advanced six basis points to 1.72%

Commodities

• West Texas Intermediate crude rose 0.4% to $102.40 a barrel
• Gold futures rose 0.2% to $1,930.40 an ounce