RBA Holds Rates Steady, But Signals Cuts Are Just a Matter of Time
In a move that surprised many economists and market watchers, the Reserve Bank of Australia (RBA) decided to keep the official cash rate unchanged at 3.85% during its July 2025 meeting. While there had been strong expectations of a rate cut—particularly with inflation easing and financial markets pricing one in—the RBA instead opted for a “wait and see” approach, focusing on timing rather than changing course.
Governor Michele Bullock explained that while inflation has fallen significantly from its 2022 peak, the June quarter CPI data—though largely in line with forecasts—showed slightly stronger-than-expected figures. That hint of resilience in inflation was enough for the Board to pause further easing, even though the cash rate has already dropped 50 basis points over the last five months. The Board made its decision by a narrow margin—six members voted to hold, while three were in favour of a cut.
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This doesn’t mean cuts are off the table. In fact, the central message from the RBA is clear: the direction is downward. Governor Bullock herself emphasized that the decision came down to timing, not direction, and unless inflation surprises on the upside in upcoming data, a cut is just a matter of "when, not if."
Globally, uncertainty remains high, with trade tensions and evolving policy responses keeping financial markets on edge. Domestically, signs are mixed—household incomes have improved and financial stress indicators have eased, but businesses still struggle to pass on rising costs, and productivity remains weak. The labour market is tight, yet wages growth has softened.
In essence, the RBA is walking a tightrope. It's trying to support the economy without reigniting inflation. Their cautious tone reflects the difficulty in balancing strong employment, subdued demand, and the risk of moving too soon or too late. For now, Australian borrowers will need to hang tight a little longer—but relief does appear to be on the horizon. The Bank is watching the data closely, and unless the next inflation figures throw a curveball, rate cuts are coming. It’s just a question of when.
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