🏦 Why the RBA Kept Rates on Hold in July — And What Comes Next

In a move that surprised financial markets and borrowers alike, the Reserve Bank of Australia (RBA) held the cash rate steady at 3.85% during its July 2025 meeting. While many had expected a cut, the decision signals a deliberate — and cautious — wait-and-see approach in an economy delicately balancing inflation, global volatility, and shifting domestic sentiment.

⏸ A Pause, Not a Pivot

RBA Governor Michele Bullock made it clear: this wasn’t a reversal — it was a pause based on timing.

“We remain confident that the next move in interest rates will be down,” Bullock said. “But we want to make sure we’ve nailed inflation before we proceed.”

The message? The RBA still sees easing ahead — but only when there’s firmer proof that inflation is sustainably under control.

📉 The Inflation Picture: Encouraging, But Not Conclusive

Recent inflation figures looked promising. Headline CPI for May landed at 2.1%, with trimmed mean inflation at 2.4% — squarely within the RBA’s 2–3% target band. But Bullock warned against putting too much faith in monthly numbers, which she called “volatile and unreliable” indicators.

Instead, the Board is waiting on the more stable June quarter CPI data, due out at the end of July. While early reads suggest inflation is on track, the data came in “slightly stronger than expected,” reinforcing the RBA’s decision to wait.

⚖️ A Divided Board

For the first time, the RBA revealed that its decision was not unanimous — a 6–3 split, with a minority of Board members favouring an immediate cut.

Federal Treasurer Jim Chalmers acknowledged the market’s surprise:

“It’s not the result millions of Australians were hoping for or what the market was expecting,” he said, while also noting “substantial and sustained progress on inflation.”

Chalmers welcomed the transparency, calling it a “substantial change in the way the Reserve Bank reports its decisions.”

🌍 Global Risks in Focus

Another reason for caution? Global uncertainty — especially rising U.S. tariff risks, which could create ripple effects across trade and inflation.

Deputy Governor Andrew Hauser stated:

“The impact of U.S. tariffs on Australia is still emerging, and unlike in the U.S. and Europe, Australian business and household sentiment has not deteriorated markedly.”

With international volatility still a wildcard, the RBA isn’t keen to act prematurely.

⏭ What’s Next?

All eyes are now on the July 30 CPI release. If inflation continues its downward path, the RBA’s August 12 meeting could mark the beginning of rate cuts — a move many economists now expect.

As The Australian Financial Review noted:

“Governor Michele Bullock defied financial markets and the government by holding interest rates steady, saying she wants to be more confident that inflation is under control before cutting again.”

💡 What It Means for You

• Homeowners: No rate relief yet, but a cut may be weeks away. It could be time to assess refinancing or locking in rates.

• Investors: The pause signals near-term stability. It’s a good moment to explore high-yield opportunities or get financing prepped.

• Buyers: If you’re sitting on the sidelines, this could be your lead time before cuts reinflate property competition.

📊 In Summary

Factor	Impact on Decision
Mixed inflation data	RBA held for more confirmation
Global risks	U.S. tariffs add uncertainty
Board not united	Rare split vote (6–3)
Strong forward guidance	Rate cuts still likely this year
July CPI awaited	Key trigger for August decision

The bottom line?The RBA is being cautious, but not complacent. Inflation is easing — just not quite enough. If July’s data cooperates, a rate cut could be just around the corner. In the meantime, borrowers and investors alike should be positioning for what could be the start of a long-awaited shift.