By Susan Mathew

Dec 15 (Reuters) - Emerging market stocks and currencies fell on Thursday after a hawkish stance from the U.S. Federal Reserve raised recession fears, with currencies of South Africa, Thailand and South Korea losing around 1% each as the dollar rallied.

The Fed will deliver more interest rate hikes next year even as the economy slips towards a possible recession, Chair Jerome Powell said on Wednesday after hiking by 50 basis points. Powell projected the rate would continue rising to above 5% in 2023.

"This fresh development strained risk appetite as investors became concerned over tighter monetary policy triggering a recession," said Lukman Otunuga, senior research analyst at FXTM.

The Fed has so far raised interest rates by 425 basis points this year in one of its fiercest battle against inflation in recent times. The focus is now on decisions from the European Central Bank and the Bank of England later in the day, with both seen hiking interest rates.

Aggressive policy tightening by major central banks have hit risk appetite this year, with an index with EM stocks .MSCIEF on track for its steepest decline since 2008, while currencies .MIEM00000CUS look set to mark their worst year since 2015.

Until about a month ago, the EM currencies index was on track for its worst year on record, but optimism from a broad easing in China's strict COVID-19 curbs as well as hopes the Fed would temper its pace of hikes after four consecutive increases of 75 bps helped cut some losses.

In emerging market fixed income, spreads and local yields nudged lower.

China's yuan CNY= and stocks <.SSEC .HSI fell as data showed industrial production growth slowed more than expected in November, while retail sales had their biggest contraction since May. These data sets are from before the recent easing in curbs.

Losses in the Hong Kong dollar HKD= were capped as the Hong Kong Monetary Authority raised its base rate by 50 basis points to 4.75%. Philippines and Taiwan also raised their benchmark interest rates on Thursday. A hike from Mexico is expected later in the day, while Russia is seen keeping key rate on hold on Friday.

Ghana's cedi GHS= steadied after a 16% slide on Wednesday. In Kenya, yields on the 2048 sovereign dollar bond KE178171062= stabilized, while that of the 2034 bond KE235478161= rose after both hit April lows on Wednesday after rating agency Fitch downgraded Kenya by one notch to B, bringing it in line with S&P Global. For GRAPHIC on emerging market FX performance in 2022, see Link For GRAPHIC on MSCI emerging index performance in 2022, see Link

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For CENTRAL EUROPE market report, see

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Reporting by Susan Mathew in Bengaluru; Editing by Krishna
Chandra Eluri