Many economists were expecting the U.S. Federal Reserve Board to deliver a full 1% rate cut Tuesday. It fell short of that mark, and also signaled to economists that its cutting activity may be slowing.

While the market was looking for a 100 bps cut, it turns out that the Fed was divided between dropping rates 75 basis points and 50 bps. Ultimately, it cut both the fed funds rate and the discount rate by 75 bps to 2.25% and 2.5%, respectively.

“Although the FOMC still sees downside risks to growth the committee also acknowledged that policy actions taken so far — rate cuts as well and introduction of new term-lending facilities — should help promote moderate growth over time,” noted National Bank Financial.

Looking ahead, with the fed funds rate right in line with the inflation rate, NBF sees the Fed acting “less forcefully on the interest rate front over the coming months”.

“With a growing list of dissenters and the recognition that inflation expectations have risen, we see limited scope for further large rate cuts in the short term. We are in fact reassured by today’s press release which shows concerns about inflation expectations, the cornerstone of credible monetary policy,” it notes. “The perception of a reckless Fed would undermine the value of long-term U.S. Treasuries and undermine its efforts to stabilize the situation. Our 2% target for the fed funds this summer looks reasonable at this point.”

BMO Capital Markets also sees three signs of less aggressive easing in the months ahead: the Fed’s reference to its liquidity fostering measures in the policy statement; indications of heightened concern about inflation; and, the two dissenting votes.

“With the home-price-deflation catalyst to the economic and credit market turmoil still working, the U.S. recession is poised to deepen further,” BMO says. “As long as this persists, the FOMC will have a bias to cut rates. However, the Fed seems to be signaling a more measured approach to easing for the time being.”

TD Economics says that the tone of the statement, on balance, suggests that more rate cuts are in the pipeline.

“Given that credit markets remain in a fundamental paralysis, and the economy continues to unwind, we are of the view that the Fed will remain in an easing cycle for the next few meetings. The key issue is to first unclog the credit markets and get the wheels turning again. The economy will naturally have to reach a bottom, and with sufficient stimulus, the Fed can engineer a modestly softer landing than otherwise. As such, we expect considerable further easing in the near term.”