Sharecast - At 0915 BST, the FTSE 100 was down 0.4% at 7,759.46.
Victoria Scholar, head of investment at Interactive Investor, said: "Following a drop on Wall Street, European markets have opened lower although the FTSE 100 is nursing more modest declines partly thanks to a boost from Shell (LON:RDSa) and Next which are among just a handful of gainers on the index following their positive first quarter updates.
"As expected, the Federal Reserve raised interest rates by another 25-basis points last night lifting the benchmark overnight lending rate to a range of 5-5.25%. Looking ahead Fed Chair Jay Powell suggested the central bank is approaching the peak of the tightening cycle commenting ‘we’re close, or maybe even there’. US interest rates now stand at a 16-year high after the Fed raised rates ten times in the last year and two months."
Worries about US banks were playing on investors’ minds again after PacWest Bancorp tumbled 50% in after-hours trading after saying it was considering its strategic options, including a sale.
Scholar said: "PacWest is the latest lender to fall victim to the turmoil in the US mid-cap banking sector with worried investors either cutting their holdings or adding to short positions which has punished its share price.
"PacWest has a heavy focus on commercial real estate lending, which has suffered on the back of the Fed’s aggressive rate hiking path after the longstanding punchbowl of cheap money was removed."
In equity markets, St James’s Place, Glencore (LON:GLEN), Hiscox (LON:HSX) and Admiral were the worst performers on the FTSE 100 as they traded without entitlement to the dividend.
BAE Systems (LON:BAES) also fell even as the defence contractor said that trading so far this year has been in line with expectations, with "continued good operational performance".
Virgin Money (LON:VMUK) was under the cosh as it posted lower first-half profit due to an increase in impairment charges for bad debts and higher investment costs.
On the upside, Hargreaves Lansdown (LON:HRGV) was a high riser after a well-received first-quarter update.
Oil giant Shell rallied as it beat forecasts to post a first-quarter net profit of $9.65bn, although down 2% year-on-year due to lower oil and gas prices.
Clothing and homeware retailer Next was also in the black as it backed its full-year guidance and posted a smaller-than-expected drop in first-quarter sales.