The pan-European FTSEurofirst 300 index <.FTEU3> and the euro zone's blue-chip Euro STOXX 50 index <.STOXX50E> both fell 0.5 percent.

The Fed held interest rates steady on Wednesday and indicated that moderate U.S. economic growth and "strong job gains" would allow it to tighten policy this year, with fresh projections showing that policymakers expected two quarter-point hikes by the year's end, half the number seen in December.

The Fed's update weakened the U.S. dollar on currency markets, while it also boosted the euro .

However, the euro's gains weighed on European stocks, since a stronger euro can make it harder for European companies to sell their goods overseas.

"Stocks are moving lower on the back of the euro's advance. We're just consolidating some of the gains made over the last month," said Clairinvest fund manager Ion-Marc Valahu, pointing to a rise of around 10 percent on the FTSEurofirst over the last month.

Lufthansa fell 5.6 percent after the airline reined in its profit expectations, while Immofinanz slumped 9 percent after reporting a loss.

VIENNA DOWN

The shares of top mining and energy companies were among the best performers, as the weakening of the U.S. dollar on currency markets made commodities less expensive for consumers paying with other currencies.

British miner Anglo American surged 10 percent, while oil majors such as BP and Total also rose as oil prices advanced, after the world's biggest suppliers firmed up plans to meet to discuss an output freeze. [O/R]

However, Austria's benchmark ATX <.ATX> fell 0.8 percent, underperforming other European markets.

The Austrian stock market was hit by the slump in the shares of Immofinanz as well as a similar drop in Vienna Insurance, whose results disappointed investors.

The ATX is down around 4 percent since the start of 2016 while the FTSEurofirst is down 7 percent, with stock markets having fallen on concerns about a China-led global economic slowdown.

(Editing by Tom Heneghan)

By Sudip Kar-Gupta