The Federal Reserve pushed the pause button on its aggressive rate-cutting campaign last night, trimming only a quarter-point off the cost of borrowing in its battle to lift an economy that has been left reeling by a housing slump and month of credit market turmoil.

The cut, smaller than those made by the central bank in recent months, was widely expected by financial markets. It brings the benchmark federal funds down to 2%, more than three percentage points below the 5.25% rate in effect before September 18, when the Fed started trimming the rates amid a growing credit crisis. The fed funds rate is now at its lowest level since late 2004.

"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time," the Federal Open Market Committee said in a statement after yesterday's meeting in Washington.

"The committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."

Chairman Ben Bernanke and the other members of the FOMC decided on a less dramatic reduction because the eight months of turbulence that has rocked financial markets seems to have eased and because there are growing concerns about inflation stemming from soaring food and energy costs.

"Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters," Bernanke and his colleagues said in the statement.

The Fed delivered two three-quarter-point moves and one half-point cut over an eight-week period from mid-January to mid-March that represented the central bank's boldest rate cuts in a quarter-century.

Ahead of the announcement, the Commerce Department estimated that the US gross domestic product rose modestly during the first quarter at a seasonally adjusted 0.6% annual rate. However, the growth rate was higher than the 0.5 % pace analysts had been expecting Paul Ashworth, an analyst at Capital Economics in London, said the US data gave little evidence that the world's largest economy would avoid tumbling into recession.