Aussie slips as Fed's "hawkish cut" dashes December dovish hopes

• AUD/USD falls as Powell tempers expectations for December rate easing.
• Powell cites 'strongly differing views' in FOMC, noting policy may already be near neutral.
• Earlier Australian inflation boost fades as Dollar strengthens on Fed's hawkish tone.

The Australian Dollar dropped on Wednesday after the US Federal Reserve cut rates by 25 basis points but signaled that the December's meeting remains open, after Powell said that a cut is far from a done deal. The AUD/USD trades at 0.6569, down 0.25%.

AUD/USD retreats 0.25% after Powell signals rate cut not guaranteed

In his press conference, Fed Chair Jerome Powell said, "A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it." He said that there are "strongly differing views" among his Fed colleagues at the Federal Open Market Committee (FOMC) about the forward path for interest rates.

He added that "there's a sense" that some officials would like to move to the sidelines, commenting that the fed funds rate is at neutral or near neutral, according to the September's Summary of Economic Projections (SEP).

Earlier, the majority of the Fed officials voted to reduce the fed funds rate to 3.75%-4%, except for two dissenters. The Fed Governor Stephen Miran on a dovish note, voted for a 50-bps rate cut, while the Kansas City Fed President Jeffrey Schmid opted to keep rates unchanged.

In its statement, the Federal Reserve said "that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated."

They added, "The Committee decided to conclude the reduction of its aggregate securities holdings on December 1," signaling an end to its balance sheet runoff as part of its ongoing policy recalibration.

In Australia, the latest inflation report, pushed the AUD/USD towards a three-week high of 0.6617 amid growing speculation that the Reserve Bank of Australia (RBA) might opt to hold rates. However, the Fed's hawkish cut, capped the Aussie's Dollar advance as the Greenback recovered some ground.

AUD/USD Price Chart - Daily