As expected the U.S. Federal Reserve Board cut interest rates 25 basis points today to 3.5%.

The Federal Open Market Committee at its meeting today decided to lower its target for the federal funds rate by 25 bps to 3.5%. It also approved a 25 bps reduction in the discount rate to 3%.

Today’s action by the FOMC brings the decline in the target federal funds rate since the beginning of the year to 300 bps.

There was some hope that the Fed would go as far as a 50 bps cut. Traders had already priced a 25 bps cut into the market, and had given less than 50% chance for 50 bps.

In its accompanying policy statement, the Fed left the door open to further future rate cuts. It said, “Although long-term prospects for productivity growth and the economy remain favorable, 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.”

It noted that while the consumer remains relatively strong, business spending continues to degrade. “Household demand has been sustained, but business profits and capital spending continue to weaken and growth abroad is slowing, weighing on the U.S. economy. The associated easing of pressures on labor and product markets is expected to keep inflation contained.”

Stocks sold off on the news, as some traders hoped that the Fed would sound the all clear in its policy statement, indicating that the worst is over and the cuts are finally starting to take effect.

Most economists expect to see the Bank of Canada follow the Fed’s lead, cutting domestic rates by 25 bps at its next meeting a week today.