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At least the

Fed

didn't blow it. The

Federal Open Market Committee's 50 basis-point rate cut gave the markets just enough oxygen to keep breathing until the next rate cut. It could have been worse.

In the statement that accompanied the FOMC's decision, there was nothing explicit to conclusively enshrine the "one-and-done" argument that has led to a crash in long bonds over the past three weeks. But so far that sentiment -- which holds that this would be the last rate cut -- continues to prevail, because there was nothing in the statement to refute it, either. The flash analyses by the big Wall Street investment banks reflect only limited optimism that rate cuts will continue.

Merrill Lynch

wrote: "We think another easing is likely at the next FOMC meeting on June 27. However, we think it is also likely the Fed will move to smaller increments, 25 basis points, although this depends upon the kind of economic data that is released between now and then. As we have previously said, we think the

fed funds rate will be at 3.5% by the end of August."

Goldman Sachs

wrote: "We retain the view that another 50 basis points is likely before the end of summer; whether at the next meeting remains to be seen."

Credit Suisse First Boston

wrote: "The funds rate has fallen by a cumulative 250 basis points so far this year. It's time for the Fed to take a breather."

And

Morgan Stanley

wrote: "In the end, their options remain open and they can respond to the incoming data flow as appropriate. We continue to look for a 3.75% trough on the funds rate implying some slight further easing -- probably at the August meeting."

Since the announcement, I've received several emails asking why only a handful of regional Federal Reserve Banks requested a cut in the discount rate this time around, compared to the unanimous requests that had accompanied the previous cuts this year. My favorite Fed guru, David Gitlitz, now managing director and senior economist at

Kudlow & Company

(and an occasional contributor to

RealMoney.com

), told me not to worry about it.

According to Gitlitz: "It's pretty much a formality. They all knew they would be cutting rates today, so it doesn't really matter whether all 12 request the discount rate move. It could be that earlier in the process Greenspan wanted to convey some sense of urgency with a unanimous request."

For me, the only upbeat element of the FOMC statement was, for the first time since Jan. 31, an explicit reference to inflation: "With pressures on labor and product markets easing, inflation is expected to remain contained." This seems to be directed explicitly at concerns that have evolved since the Fed's last surprise rate cut -- that a headlong easing process would inevitably lead to a resurgence of inflation.

So at the end of the day I remain convinced that nothing but the most aggressive, immediate and persistent easing by the Fed will do. And I remain concerned that cutting rates isn't even an effective way to ease -- if by "ease" we mean printing more money to halt the persistent deflationary spiral induced by the Fed's previously too-tight policies. While the various "M" measurements have grown rapidly this year, the Fed's balance sheet has shown no net growth, and the adjusted monetary base has been declining at an annual rate of about 1% over the past three months.

It's easy to say, "Don't fight the Fed." But consider what the Fed itself has to fight. We are in a "post-bubble" economy in which unprecedented inventory and debt adjustments still remain to be accomplished, in which risk aversion is abnormally high, and in which returns on capital investment are abnormally low.

That's a world of deflation and default in which cash in king. Only the Fed can dethrone cash -- and the only way to do that is to print more of it than people want. That's not going to happen with the kind of rate cuts the market is now forecasting.

This is still a bear-market rally, folks.

Don Luskin is President and CEO of

MetaMarkets.com, and a portfolio manager of OpenFund. At time of publication, OpenFund had no positions in any of the securities mentioned in this column, although holdings can change at any time. Luskin appreciates your feedback and invites you to send it to

Don Luskin.