The Federal Open Market Committee decided Wedesday to lower its target for the the U.S. federal funds rate by 25 basis points to 1%, pushing the cost of borrowing down to levels not seen since 1958.

In a related action, the board of governors approved a 25 basis point reduction in the discount rate to 2%.

Traders were split over whether the Fed would cut rates 25 bps or 50 bps.

Notably, the committees’ decision was not unanimous. Voting against the action was San Francisco Fed president Robert Parry. Parry preferred a 50 bps reduction in the target for the federal funds rate.

In its policy statement, the Fed indicated that the conditions are right for a turnaround, but it hasn’t emerged yet.

The Fed indicated a balanced bias, saying, “The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal.” However, it also indicated that it is more concerned about deflation, “The probability, though minor, of an unwelcome substantial fall in inflation exceeds that of a pickup in inflation from its already low level.”

The initial market reaction was negative as the Treasury market dropped, stocks fell and the U.S. dollar firmed.

Economists say U.S. rates should stay low for a while, noting the Fed’s concerns about deflation.

BMO Nesbitt Burns chief economist Sherry Cooper says the Fed should have cut rates even further. “I think the Fed made a mistake with this wishy-washy position. Why not have taken the full 50 basis points now and put an exclamation point on their deflation battle?” Cooper asks.

She says markets will still be poised to expect another 25 bps rate cut August 12 at the next FOMC meeting.

TD Bank agrees that the door is open for further cuts, although it doesn’t expect them.

Cooper says today’s decision by the Fed puts the Bank of Canada plans to hike rates firmly on hold.. “With the Fed showing such restraint, why would the Bank shift gears at this point?” it asks.

The Bank of Canada will make its next decision on rates on July 15.