The pan-European FTSEurofirst 300 index lost 0.35 percent and MSCI's gauge of stocks across the globe shed 0.24 percent.
Germany's DAX Index rose 0.3 percent.
The dollar index, which tracks the greenback against six major currencies, fell to its lowest level since November 9 in early trading after the release of weaker-than-expected USA inflation and retail sales figures. The markets have priced in at least three hikes this year. Inflation was expected to be at 1.7 percent by the end of this year, down from the 1.9 percent previously forecast. The Fed has received some criticism lately for pursuing its gradual path of rate increases even though the United States economy has been growing at only a moderate pace and inflation has softened in recent months.
The technology sector fell 1.2 percent, with Apple off 1.6 percent. This was further highlighted today by the latest CPI and retail sales figures released earlier in the day, which all missed expectations, raising fresh doubts about the strength of the U.S. economy.
Deepening political turmoil in Washington also weighed on the greenback, with the Washington Post reporting that US President Donald Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice. Mueller is examining alleged Russian interference in the 2016 USA presidential election, a claim vehemently denied by Trump. Trump's legal team denounced the report.
The euro edged down slightly to US$1.1214, below a seven-month peak of US$1.1296 scaled overnight.
The dollar fetched 109.35 yen, not far from Wednesday's eight-week low of 108.81 yen.
The latest rate increase, announced in a statement after a Fed policy meeting, comes as the us economy is growing only sluggishly.
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"Now that the Fed is apparently not as dovish as we thought and won't be reacting to weak inflation numbers, the Aussie and kiwi are naturally giving up their gains", Franulovich said.
"The Fed seems to think the weakness is temporary". The economy has added jobs for 80 consecutive months.
The expectation of a Fed rate hike has been the most important factor weighing on gold prices in 2016 and 2017.
"The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further", the statement read. The amount of securities the Fed held on its balance sheet ballooned from less than a trillion dollars before the crisis to roughly $4-and-a-half trillion.
The yuan held stable in early trade, trading at 6.7854 per dollar in the offshore trade.
The market had already anticipated a rate hike by Fed, as the Federal Reserves' Chairman Janet Yellen had given many signals of a rate hike.
Crude oil prices were listless after having slumped almost 4 per cent to their lowest close in seven months on Wednesday, on an unexpected large build in gasoline inventories. Shares in Southeast Asia also were mostly lower. That means it has now been below the 2 percent target for more than five years.
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