In a move that stunned economists and financial markets, the Reserve Bank of Australia (RBA) has decided to hold the official cash rate at 3.85%, dashing hopes of a second consecutive rate cut in 2025.
This surprise decision comes despite a trio of factors that typically point toward easing: weak economic growth, inflation cooling to just 2.1%, and growing concerns over the global economic fallout from Donald Trump’s escalating trade war.
💥 The Cut That Never Came
Leading into today’s announcement, a vast majority of economists and market watchers had priced in another cut, expecting the RBA to lower the cash rate for a second straight month — a move that hasn’t been seen since March 2020.
But instead, the RBA board opted for caution, citing the need to “wait for a little more information” before making its next move. Specifically, it wants to review quarterly consumer price index (CPI) data, which will be released at the end of this month, before deciding whether further easing is warranted.
“We need to confirm that inflation is still moving in the right direction before taking additional steps,” the board said in its monetary statement.
What This Means for Homeowners
For the millions of Australians with mortgages, this decision feels like a bitter blow. With interest rates already falling twice earlier in the year, there was a strong sense of optimism that back-to-back cuts would provide some much-needed breathing room for household budgets.
Instead, mortgage holders will need to continue managing repayments at current levels, at least until the August RBA meeting — and even that will depend on how inflation tracks.
Treasurer Jim Chalmers weighed in, calling it “not the result millions of Australians were hoping for,” but added that progress on inflation had still been significant in recent months.
📈 Market Reaction
The markets didn’t take long to respond. The Australian dollar jumped sharply, rising from US65.15c to US65.5c within minutes of the decision — reflecting the surprise hold and revised expectations for future cuts.
Meanwhile, the ASX showed signs of volatility, as investors recalibrated their strategies in light of the RBA’s shift in tone.
Global Headwinds + Domestic Uncertainty
Adding another layer of complexity is the global backdrop. Donald Trump’s renewed trade war threats have rattled global markets, raising the risk of slower international growth — a factor that typically prompts central banks to adopt a more dovish stance.
And yet, the RBA has opted to hold, choosing data over speculation, despite domestic indicators like GDP softening and household spending slowing under the weight of high interest rates.
What’s Next?
All eyes now turn to the CPI figures due later this month. If inflation continues to show signs of moderation — and no unexpected shocks hit the global economy — the RBA may return to the table with a cut in August.
But for now, Australians are being asked to wait a little longer for relief — and hope that “a little more information” comes with a lot more action next time.
Key Takeaways:
- The RBA has held the cash rate at 3.85%, defying widespread expectations.
- Mortgage relief is delayed, with no cut this month.
- Next possible rate cut: August, depending on end-of-month inflation data.
- The Australian dollar jumped in response to the decision.
- Economic uncertainty — both domestic and global — remains front of mind.
