ECB drops reference to a future rate cut, says ready to extend QE

• European Central Bank (ECB) holds interest rates at 0.0 percent.
• The bank removes reference to further rate cuts and says it will extend its quantitative easing (QE) program if required.
• The euro dips to $1.229 against the dollar.

The European Central Bank (ECB) left its benchmark interest rate unchanged on Thursday and dropped any reference to a future rate cut.

In a statement it said it expected interest rates to "remain at present levels for an extended period of time," but added that it would be ready to extend its quantitative easing (QE) program if needed. The ECB's message sent the euro dipping down to $1.1229 against the greenback from around $1.1240.

The decision marked the fifth consecutive quarter that the central bank has held rates steady at 0.00 percent and will come as little surprise to market watchers, who were largely anticipating a continuation of the status quo.

Mario Draghi, president of the ECB, said in a press announcement in Tallinn, Estonia, that the bank considered the risk in the region to now be "broadly balanced." However, he tempered this view with a downward revision of the bank's inflation projections, based on its view that struggling oil prices will continue to weigh on inflation levels.

The ECB now anticipates inflation levels of 1.5 percent in 2017, 1.3 percent in 2018 and 1.6 percent in 2019. This is down from the forecasts released in March, which saw inflation reaching 1.7 percent in 2017, 1.6 percent in 2018 and 1.7 percent in 2019.

The forecasts remain well below the central bank's inflation target of below but close to 2 percent, however, they were widely expected following a leak on Wednesday which preempted the plans.

Draghi said the central bank would remain poised to extend its accommodative monetary policy if necessary.

Capital Economics' chief European economist Jennifer McKeown said ahead of the announcement that the ECB's announcement was likely to indicate that policy tightening is "a long way off."

"The only change in the statement is that interest rates are now expected 'to remain at present levels for an extended period', rather than 'at present levels or lower'. This tweak was broadly anticipated and the press conference seems likely to reveal that Council members now see risks to the economy as balanced instead of tilted to the downside," she added.

Saxo Bank's John Hardy told CNBC ahead of the announcement that he believed any immediate dip in the euro during Thursday's meeting would be short-lived, but added that the leak may have been used to prevent a euro rally.

"I think the dovish inflation forecasts that were leaked were a way to avoid the euro rallying – which I think it will eventually in the wake of today's meeting, even if there is a brief dip because very little new is actually announced," he noted.

- CNBC's Silvia Amaro contributed to this report.

Follow CNBC International on Twitter and Facebook.