The U.S. Federal Reserve cut its target rate by 75 basis points on Tuesday, below the full-point cut expected by Wall Street. The reduction brings the key federal funds rate to 2.25%, the lowest since February 2005. The markets had forecast a full-point cut, though expectations were scaled back on Tuesday after two major Wall Street firms, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., provided some relief with better-than-expected earnings. "Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labour markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters," the Federal Reserve said in a statement. Two members voted against the cut, Richard W. Fisher and Charles I. Plosser, arguing for less aggressive action. North American stocks fell flat shortly after the Fed announcement. Markets had risen significantly earlier in the day on expectations of a full-point cut. The Fed has now cut rates by 3 percentage points since mid-September, including 2 points since the start of the year as a rise in defaults on subprime mortgages has escalated into a financial crisis that this weekend claimed one of Wall Street's most venerable firms, investment bank Bear Stearns, as a victim. In recent days, the central bank has also unveiled steps not used since the Great Depression to ensure financial institutions have access to liquid funds. On Tuesday, the Federal Open Market Committee said it remained concerned about inflation, especially the impact of energy and commodity prices might have on consumers. On Tuesday a key measure of core inflation at the producer level climbed at the fastest pace in well over a year. However, it said it expects inflation to moderate in coming quarters. Many economists believe the U.S. economy is already in recession, and on Tuesday U.S. Treasury Secretary Henry Paulson conceded the economy was in "sharp decline." In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2%. As expected, Fed has cut its interest rate off 0.75 point below than the expectation of overall financial analysts, trying to support a weak economy under the credit crunch's effect resulted from the sub-prime crisis in the last July. What is the next move of Canadian central bank accordingly to this spectacular cut by the South neighbor. We have predicted a half point cut down by the central bank in the next scheduled meeting, but it seems that benchmark is not sufficient to stimulate the economy.