OTTAWA (Reuters) - The Bank of Canada slashed its benchmark interest rate by another half-percentage point on Tuesday to 3 percent as insurance against a steep U.S. economic downturn that threatens to engulf Canada.

Additional rate cuts are likely to be needed, the bank said, but it left open the possibility of a pause in its easing cycle as it stands back to assess the fallout from global economic woes before its next rate decision on June 10.

It dropped a previous reference that said it would have to lower rates in the "near term."

"Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada," it said in a statement.

Most market players had expected the 50-point cut as evidence mounts that the impact of the weakening U.S. economy is being felt in Canada, dampening exports and jobs growth.

But reaction was mixed to the more dovish tone on the bank's next move.

"It's as if the bank is signaling some sort of pause but then a pause is, in my view, not logical," said Carlos Leitao, chief economist at Laurentian Bank of Canada.

"If the economy needs further rate cuts then you do it."

Others remained confident the bank would reduce borrowing costs again on June 10, but only by 25 basis points and possibly for the last time.

"We have another 25 (basis points) to go and it doesn't look like that runs in contrast to the underlying tone of the release," said Craig Wright, chief economist at Royal Bank of Canada.

It was the second successive 50-basis-point cut to the bank's overnight target rate, making this its most aggressive round of rate cuts since the period following the September 11, 2001, attacks on the United States.

More details on the bank's thinking will be available on Thursday when it releases its new economic projections.