MUMBAI -- The U.S. Federal Reserve will signal a pause in its monetary stance after cutting interest rates by a quarter percentage point on Wednesday, the global research head of Goldman Sachs said.

"We think Fed's going to drop rates by 25 (basis points) tonight and then it's going to pause," Jim O'Neill told a news conference in Mumbai on Wednesday.

The Fed, which opened a two-day meeting on Tuesday, will announce its rate decision and offer an assessment of threats facing the world's largest economy at around 1815 GMT.

"We had been expecting the Fed to take interest rates down to 2 percent for most of last year. The Fed is going to keep rates on hold until it sees the cumulative effect of what it has done," O'Neill said.

He expected European Central Bank (ECB) to keep rates steady. "The ECB is going to keep rates unchanged for a long time and after that it's going to continue reducing rates," O'Neill said.

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The ECB has held rates for the last 10 months despite the Fed, the Bank of Canada and the Bank of England cutting rates to cope with problems in the global credit markets.

O'Neill said he does not anticipate a major slowdown in China's economic growth, which had eased to 10.6 percent in the first quarter of 2008 from 11.2 percent in the final three months of 2007.

"China may have slowed a little, but not much," he said.

Goldman's India economist, Tushar Poddar, said he expected the Reserve Bank of India's stance of monetary tightening to remain in the coming months.

India's central bank on Tuesday said it was raising the proportion of deposits that bank must set aside by 25 basis points to a seven-year high of 8.25 percent with effect from May 24 to drain inflation-fuelling cash in the banking system.

It left all other rates unchanged.

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