RBA surprises markets by keeping rates on hold in July policy meeting

The Reserve Bank of Australia (RBA) left its cash rate unchanged at 3.85%, as most board members preferred to wait for more evidence that inflation is slowing.

The central bank’s decision surprised markets, which had widely expected a 25 basis point rate cut at today’s policy meeting, following earlier cuts in February and May.

Wrapping up a two-day meeting, the RBA said it remained cautious about the inflation outlook. Six members voted to hold rates steady, while three voted in favor of a cut — a rare split decision for the board.

RBA Governor Michele Bullock emphasized that the disagreement was more about timing, and reiterated that the bank remains on an easing path, provided that second-quarter CPI figures come roughly in line with forecasts. She also noted that monthly inflation reports can be volatile.

Policymakers stressed the importance of ensuring inflation stays within the RBA’s 2%-3% target range before deciding on further policy easing. While the worst-case scenario from U.S. tariffs has been averted, they noted that trade-related costs remain elevated compared to prior levels.