Australian Dollar holds its ground as Fed pause reveals divisions over inflation

• The Fed's widely anticipated decision to leave rates unchanged keeps AUD/USD steady.
• Rates remain at 3.75%-4% as the Fed holds, although two officials favour an increase.
• With US growth holding up and inflation still elevated, further monetary tightening remains a possibility.

US inflation remains well above the Federal Reserve's 2% target, but the central bank left interest rates unchanged, with the Australian Dollar holding firm against the US Dollar following the decision. Two members dissented, preferring a quarter-percentage-point increase. AUD/USD is trading at 0.7056.

AUD/USD holds firm after Fed leaves rates unchanged despite two votes for further tightening

Interest rates were left at 3.75%–4% by the Fed on Wednesday. Dissenting from the decision, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both backed a 25-basis-point increase.

In its assessment of the economy, the Fed recognised continued expansion in activity and said domestic spending “has been resilient, that productivity growth is strong and that capital investment is robust,” while also highlighting strong productivity growth. Turning to its employment mandate, it observed that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

Although the central bank described inflation as still elevated, it opted to defer further rate increases while collecting additional information and evaluating the appropriate policy stance.

AUD/USD – Daily Price Chart