The U.S. Federal Reserve’s Open Market Committee took the cautious road today with a 25 basis-point cut. There was a real split among economists as to whether the Fed would go 25 bps or 50 bps, was certain.

The FOMC decided to lower its target for the federal funds rate by 25 bps to 3.75% and the discount rate to 3.25%. Today’s moves brings the drop in the target federal funds rate, since the beginning of the year, to 275 bps.

The Fed signaled in it’s accompanying policy statement that it is still worried about growth in the U.S. economy. The lack of inflation allows room for further cuts, it said. “The patterns evident in recent months – declining profitability and business capital spending, weak expansion of consumption, and slowing growth abroad – continue to weigh on the economy. The associated easing of pressures on labor and product markets are expected to keep inflation contained.”

Traders were hoping for some sign of economic recovery in the policy statement, and while there was a slight indication of hope, it wasn’t decisive.

“Although continuing favorable trends bolster long-term prospects for productivity growth and the economy, the committee continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future,” the Fed said.

Markets immediately sold off on the news, but the slide was muted and it quickly halted. So far, investors seem to view the smaller cut as more optimistic than a larger cut. The Fed has also left room for more cuts. It has already signalled its willingness to produce inter-meeting moves.