RBA Surprises Markets with Rate Hold at 3.85%

The Reserve Financial institution of Australia (RBA) shocked markets at present by maintaining the money price unchanged at 3.85%, defying widespread expectations for a 25 foundation level minimize.

The choice was made by a 6-3 majority vote, marking the primary time the RBA has revealed its voting breakdown.

Key Takeaways:

RBA held charges at 3.85% vs market expectations of a minimize to three.60%
Board voted 6-3 in favor of holding charges
Current month-to-month CPI information got here in “barely stronger than anticipated”
Board needs extra affirmation that inflation stays on observe for two.5%
Cited heightened uncertainty about world commerce insurance policies and home demand

Hyperlink to official RBA Financial Coverage Assertion for July 2025

In her presser, Governor Bullock defined that the choice mirrored a “cautious, gradual stance on easing.”

The central financial institution famous that with charges already 50 foundation factors decrease than 5 months in the past, they may afford to attend for added information – particularly pointing to the upcoming quarterly CPI report on July thirtieth.

The RBA emphasised ongoing uncertainties, together with:

The complete scope and influence of US tariff insurance policies
Tight labor market situations regardless of financial softening
Lags in financial coverage transmission
Blended indicators on home demand restoration

Markets had priced in roughly 74 foundation factors of cuts by year-end earlier than at present’s resolution, and the RBA’s language suggests additional cuts stay probably as soon as they achieve extra confidence within the inflation trajectory.

Hyperlink to RBA Press Convention for July 2025

Market Response:

Australian Greenback vs. Main Currencies: 5-min

The Australian greenback popped increased after the RBA’s shock maintain, breaking out of its earlier vary following the Hong Kong and China market open.

AUD/USD jumped from the 0.6510 space to round 0.6550, with related strikes seen throughout different Aussie pairs.

Whereas the fast response was bullish for AUD, merchants ought to observe that the RBA hasn’t deserted its easing bias. The rally paused throughout Governor Bullock’s press convention, the place she emphasised that the board nonetheless agrees on the path of price cuts, simply not the timing. That pulled AUD decrease for a bit.

However the pullback was short-lived. By the point the London session rolled round, the Aussie was again on the transfer, climbing to new day by day highs as extra merchants responded to the RBA’s much less dovish shock.

For now, the shock maintain seems to be extra about prudent threat administration given present uncertainties somewhat than a basic shift within the coverage outlook. With 4 extra conferences remaining in 2025, there’s nonetheless ample alternative for the RBA to ship further easing if financial situations warrant.