The U.S. Federal Reserve Board’s move today to cut rates a half point rather than a quarter point may mean there are no more rate reductions on the way, says RBC Economics.

The Fed cut the Fed funds and discount rates by 50 basis points in an effort to stave off an economic slowdown “that might otherwise arise from the disruptions in financial markets and to promote growth over time,” notes RBC.

“The 50 basis-point cut in the funds rate to 4.75% was in line with RBC Economics’ view, but was more aggressive than the majority of forecasters who looked for a 25 basis-point Fed funds rate cut,” it says.

RBC notes that while the cuts were more aggressive than many were looking for, the statement indicates that the Fed has assumed a more neutral stance, which lessens the odds that there are more rate cuts in the pipeline. “In their statement, the FOMC implied that today’s action should be enough to offset the downside risks emanating from the recent bout of financial market volatility,” RBC observes.

TD Bank was calling for a 25 bp move, but argues that the importance of today’s decision was not only the rate cut itself, but the tone of the statement and who voted for the decision. “The fact that it was a unanimous decision is very telling. It suggests that all voting members have been swayed by the events over the past month. This includes those who took a less dovish stance in commentary prior to the blackout period,” it says.

Interpreting the statement, TD notes that the Fed did not promise further rate cuts in the future, as they left the statement rather open-ended. It concludes that the Fed has probably returned to a heavily data-dependent mode, with a probable bias towards cutting.

National Bank Financial agrees with TD’s reading of the situation, and that the Fed remains data dependant and will reassess its current policy stance on an ongoing basis. “For our part, we still believe that the headwinds facing the U.S. economy are such as to require much easier monetary policy down the road. Our projection for the Fed funds target rate remains at 3.75%,” it says.

Merrill Lynch notes that with the press statement coming in more neutral than expected, equity markets may have to reassess their reaction to the decision. “What is key is the wording of the press statement, which was less dovish than what was expected, and this is a challenge now for a two-year note and equity market priced for another round of rate relief next month.”

RBC concludes that it expects the Fed to hold the funds rate steady going into 2008 and is holding to its view that “these rate cuts will be transitory and reversed by the middle of next year as the threat from financial market volatility subsides and the risk to the inflation outlook starts to dominate concerns about economic growth.”