Fed's Quarter-Point Cut May Not Be the Last

The Fed's statement did signal that its focus remains on threats to economic growth.

"Recent information indicates that economic activity remains weak," said the Fed. "Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters."

The statement also appeared to leave the central bankers substantial leeway to change course as new information about economic conditions emerges.

"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity," the Fed said. "The committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."

The central bank has now lowered its federal funds rate by 325 basis points since the outbreak of the credit crisis last summer. The Fed's actions have been the subject of intense controversy as the economy has continued to show signs of a slowdown amid rising signs of inflation, especially in food and energy prices.

The Commerce Department reported Wednesday morning that the U.S. economy grew at a rate of 0.6% in the first quarter. Despite a weak showing, continued growth challenged the widespread belief on Wall Street that the economy is already in recession, which has been traditionally defined by two successive quarters of negative GDP growth. The report sparked a debate among investors on the current state of the economy and the definition of a recession.

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