Economists say that today’s 50 basis point cut to interest rates by the U.S. Federal Reserve may be the last rate action from the Fed for a while, but not necessarily.

Bank of Montreal notes that the move was larger than the 25 bps that much of the market expected, and it extended the easing cycle to a cumulative 525 basis points since January 2001. “Today’s action was motivated to shore-up confidence in the face of marked economic uncertainty,” says BMO. The Fed attributed the move to economic uncertainty, in part attributable to heightened geopolitical risks. The Fed’s statement also suggested that, in light of the extra stimulus injected into the economy today, the Fed has become more confident in its outlook for a sustained recovery of the economy. And, it returned its bias to neutral.

“We said it would be 50 basis points, but most did not believe us,” crowed BMO Nesbitt Burns.

Also, the decision was unanimous this time around, which TD Bank economists call, “A clear testimonial to the sour economic picture that has emerged over the past few weeks.” It says, “While today’s decision will do little to boost the interest-sensitive sectors of the economy — which have already received a huge dose of fuel from the Fed since early 2001 — it could go a long way towards helping to restore consumer, business and investor confidence, an objective that quite simply could not have been met with a mere 25 basis-point move.”

Nesbitt says that the quid pro quo for a unanimous vote on such an aggressive action was likely a return to a neutral stance. “At this stage of the cycle, the Fed believed it was important to not mess around. Give it all the stimulus it can right now in hopes of reviving a dormant capital good sector and an anemic manufacturing industry.”

Nesbitt also warns that there will be analysts claiming that the Fed’s actions will be ineffective, comparing it to the dire deflationary situation facing the Bank of Japan. “Don’t buy it. The Fed is not confronting a Japanese situation.”

“Barring the release of weak data or heightened concerns about a military attack on Iraq, we believe the Fed will remain inactive in coming months,” says BMO. “Looking further ahead, once the recovery strengthens and broadens out in the first half of next year, policymakers will likely shift towards a tightening posture beginning in the summer.”

TD agrees, saying, “Our best bet at this stage is that further easing on the part of the Fed will not be necessary — this rate cut was most likely the last of its current easing cycle. Notably, rather than keeping its bias towards easing, the Fed is confident that today’s decision will have done the job, enough so to have shifted its bias towards a neutral stance — signaling that it does not expect to have to ease further.”

However, TD also says that it would not take much to prompt the Fed to pull the trigger once again. “Should industrial and manufacturing output continue to decline — as it has in the past two months — and the employment picture continue to weaken, another rate cut could not be ruled out.”

As for Canada, Nesbitt suggests that this decision keeps the Bank of Canada from moving on rates, too. “The Fed’s actions today all but insure that the Bank of Canada will once again refrain from raising interest rates on December 3. Tomorrow, we will likely see the Bank of England and the European Central Bank cut rates as well,” predicts Nesbitt.