The US Federal Reserve cut interest rates by a quarter-point to 4.5 per cent yesterday, but warned investors against banking on further monetary easing, sending short-term government bond yields soaring.

The central bank's Federal Open Market Committee signalled it was shifting to a neutral stance on future rate cuts, saying "the upside risks to inflation roughly balance the downside risks to growth". This means Fed policymakers see the likelihood of more cuts as being no greater than the likelihood of rate hikes, in contrast to the market, which had been pricing in big further easing in the months ahead.