(Bloomberg) -- Emerging-market stocks posted their steepest monthly drop in more than three years as Federal Reserve officials signaled that they’re prepared to raise U.S. interest rates and concern grew that China’s efforts to prop up equity prices is failing.

Investor expectations that the market turmoil will spur the Fed to delay its interest-rate increase was shaken after Vice Chairman Stanley Fischer said over the weekend there is "good reason" to believe inflation will accelerate. Officials of the European Central Bank and the Bank of England echoed that view, indicating that the days of higher borrowing costs are approaching. In China, options traders increased bearish bets as they weighed the level of state support for the markets.

About $1.9 trillion -- more than Russia’s annual gross domestic product -- was erased this month from the value of stocks traded in the 31 largest emerging markets as China’s surprise devaluation of the yuan triggered a global rout. Price swings surged to the highest level since 2011 as the move heightened concern the world’s second-biggest economy will slow, undermining global demand.

“Outflows from emerging-market equities this year have been as high as during the financial crisis,” said Hertta Alava, who helps oversee the equivalent of about $395 million as the head of emerging markets at FIM Asset Management Ltd. in Helsinki. “The markets won’t start to perform well again until we get data showing the Chinese economy is stabilizing. The Fed meeting in September will be interesting. After Fischer’s speech over the weekend, the likelihood for an interest rate hike is increasing.”

ETF OUTFLOWS

Investors in U.S. exchange-traded funds that buy emerging- market stocks and bonds withdrew $2.58 billion last week. The losses in August wiped out this year’s inflows.

The MSCI Emerging Markets Index slipped 0.2% to 818.73, extending the retreat in August to 9.2%. Seven of 10 industry groups dropped, led by utility and technology stocks. The measure trades at 10.7 times projected 12-month earnings, compared with a multiple of 15.2 for advanced-nation stocks, according to data compiled by Bloomberg.

Itau Unibanco Holding SA slumped 3.6%, leading a 1.1% decline in the Ibovespa. Brazilian stocks and the real slumped amid speculation that Latin America’s largest economy is struggling to put its finances in order and avoid a credit- rating downgrade to junk.

EGYPT GAS

Shares in Saudi Arabia dropped 2.2%, extending the biggest monthly retreat in almost seven years as Brent crude declined. The nation is the worst-performer in the world this month after Greece and Kazakhstan, following a slump in the price of oil, which accounts for about 90 % of the country’s income.

Egyptian shares soared 2.8%, the most worldwide, after Eni SpA said on Sunday it discovered what it says is the largest natural gas field in the Mediterranean off the North African nation’s coast, projecting it may hold 30 trillion cubic feet of the fuel. That find sent Israeli gas shares tumbling the most this year on concern it will curtail their export outlook.

Fischer joined ECB Vice President Vitor Constancio and BOE Governor Mark Carney Saturday on a panel at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming, dedicated to discussing inflation dynamics. There, the three central bankers expressed confidence stronger growth will pull inflation higher in the U.S. and Europe.

CURRENCY SLIDE

The ECB Governing Council meets in Frankfurt on Sept. 3 while the Fed’s policy-setting committee gathers on Sept. 16-17.

The Shanghai Composite Index extended its monthly decline to 12% even as traders speculated that the government resumed share purchases on Monday afternoon. CRRC Corp., a train-equipment maker, slumped 5.9 % in Hong Kong after its first-half earnings disappointed. Citic Securities Co. slid to a three-month low after the Xinhua News Agency reported its executives were detained on suspicion of insider trading.

Brazil’s real dropped 1.1%. The won weakened 0.8% as industrial production in Asia’s fourth-largest economy fell 3.3 % in July from a year earlier, official data showed. A gauge of 20 developing-nation currencies was little changed Monday and declined 3.1% in August.

The S&P BSE Sensex slid 0.4% in Mumbai. Official data released after the close of trading showed India’s economy expanded 7% in the quarter ended June 30, versus 7.5% in the preceding three months. The median of 31 economist estimates in a Bloomberg survey was for growth of 7.4% in the most recent period.

The premium investors demand to own emerging-market debt over U.S. Treasuries narrowed two basis points to 387 basis points, according to JPMorgan Chase & Co. indexes.