Fed cuts rates, may pause

As expected, the Federal Reserve cut the fed funds rate by 25 basis points to 2 percent and moved towards a pause in easing.

Yesterday's US economic data had not been too bad and perhaps suggest that a pause is warranted. GDP increased 0.6 percent. ADP reported 10,000 additional private sector jobs. The National Association of Purchasing Management-Chicago's business activity index edged up to 48.3 this month from 48.2 in March.

An improvement in the US trade deficit contributed to economic growth in the first quarter. That's bad news for other economies.

Canada's economy shrank 0.2 percent in February.

In Europe, sentiment deteriorated in April, with the economic sentiment index for the euro area falling to 97.1 from 99.6 in March. Consumer price inflation in the euro area slowed to 3.3 percent this month while unemployment remained at 7.1 percent in March.

Things are also turning for the worse in the UK. On Tuesday, the BoE had reported that mortgage approvals had fallen to their lowest level on record in March while the CBI had reported that retail sales slumped in April. The gloomy news continued yesterday with house prices reportedly falling for the sixth month running in April according to Nationwide and the GfK/NOP consumer confidence index falling to the lowest since November 1992.