Perhaps the Fed is not quite done, after all. In the past week financial markets have clustered around a pretty firm consensus that the Fed would signal that it was getting ready to halt its long, aggressive campaign of interest rate cuts.

With signs that the worst of the credit crunch might be past and with continuing inflationary stress from energy and food prices, Wall Street economists were almost unanimous in forecasting that the central bank would make clear that its expected reduction in interest rates yesterday would be the last in the current cycle.

But Ben Bernanke, the Fed Chairman, and his colleagues on the policymaking Open Market Committee offered only veiled hints about their intentions. The overall message seemed to be that it is less inclined to cut rates in coming months — but wants to give no firm assurances that it will not do so.

The Fed did, in fact, cut its key monetary policy instrument, the target for the Federal Funds rate, as expected, by 0.25 of a percentage point, to 2 per cent. And while it suggested that the economy might face somewhat better prospects than it had when the committee last met six weeks ago, it carefully avoided giving an explicit signal that it planned a pause in its rate-cutting efforts.

The statement accompanying the decision contained slight differences in language from the one issued six weeks ago, when the Fed was still cutting. In a possible sign that the Fed believes that the worst of the economic downturn is past, it dropped its previous observation that “downside risks to growth remain”. And it referred to the rate cuts made so far — 3.25 points in the past seven months — as a “substantial easing of monetary policy", a hint, perhaps, that more cuts might not be necessary. Yet there was no unmistakeable statement that the risks were now evenly balanced between inflation and recession.

The cautious language seems to reflect a fierce internal debate. Some members of the committee clearly want the Fed to say that it will not reduce rates further because of the risk of accelerating inflation. Two, Richard Fisher and Charles Plosser, dissented for the second straight meeting in protest at the over-aggressive policy. But other members, and especially the Fed’s own economists, continue to worry that deepening recession, not inflation, is the biggest threat.

These officials remember with some embarrassment that the Fed signalled once before, in October, that it believed there was no need for more cuts and was then forced to ease policy much more aggressively.

Yesterday’s decision came amid continued uncertainty about the economy. Latest data suggest that it has still not experienced an outright contraction in activity, but further weakness is expected in the coming months as the housing market continues to deteriorate and employment weakens. But even as demand slumps, inflation has been accelerating, pushed higher by surging global food costs and record-setting energy prices.

Yesterday the Commerce Department reported that US output grew at an annual rate of only 0.6 per cent in the first three months of the year, the same pace as in the last quarter of 2007. But that figure was positive only because of a sharp increase in companies’ inventories, a factor that is likely to be reversed in the coming months.

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