AUD/USD declines despite Fed cutting rates by 25 bps.

• AUD/USD declined despite a 25 bps rate cut from the Federal Reserve.
• The Dollar Index trimmed daily losses after the Fed's decision, which weighed on the AUD/USD despite its initial rise.
• Fed policymakers expressed a balanced economic outlook, with risks to inflation and growth.

The AUD/USD currency pair declined but holds gains around 0.6640 after the Federal Reserve (Fed) cut its target range for the federal funds rate by 25 basis points on Thursday. Despite the Fed's rate cut, the AUD/USD's initial increase was capped by a recovery in the US dollar. The Fed's move comes amid ongoing concerns about rising inflation, with the central bank acknowledging a mixed economic outlook.

In their statement, Fed policymakers acknowledged the economic expansion but noted easing labor market conditions. They also recognized the progress made towards their inflation target but emphasized that it remains elevated. Despite these concerns, the Fed expressed a neutral outlook, indicating that risks to inflation and growth are roughly balanced. The central bank's decision to continue reducing its balance sheet and its commitment to data-dependent policymaking suggest a cautious approach to future rate cuts.