Fed pause reveals inflation divide as Australian Dollar holds its ground

• AUD/USD stays stable as the Fed delivers its widely anticipated rate decision.
• Two officials favour a rate hike as the Fed leaves rates unchanged at 3.75%-4%.
• Further tightening remains a possibility amid robust US growth and high inflation.

The Australian Dollar is holding its ground against the US Dollar following the Federal Reserve's decision to leave rates unchanged, even as US inflation remains well above the central bank's 2% target. Two members opposed the decision, preferring a quarter-percentage-point rate increase. AUD/USD is trading at 0.7056.

Why is AUD/USD holding firm as the Fed pauses despite two votes for further tightening?

Two officials voted for a 25-basis-point rate increase on Wednesday as the Fed kept rates unchanged at 3.75%–4%. The dissenters were Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack.

Economic activity continues to expand, the Fed acknowledged. It 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, the Fed observed that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

Although inflation remains elevated, the central bank opted against raising rates, preferring to collect further information and evaluate the appropriate policy stance.

AUD/USD – Daily Price Chart