RBA Live: Economists react to rate hold shock

15 hours ago 1

Our coverage of the July 2025 RBA cash rate decision has now concluded. The RBA has held rates at 3.85%.

Thank you for joining us

4:31pm

This concludes our live coverage of the Reserve Bank’s July cash rate decision.

To recap, the RBA board decided to hold the cash rate steady at 3.85%, defying market expectations of a 25 basis point cut and disappointing mortgage holders who were expecting a rate reprieve.

Thank you for following along with our coverage and keep an eye out for further news and analysis tomorrow.

‘Nothing we can do about housing prices’

4:27pm

Ms Bullock has said she ‘sympathises’ with the plight of young people trying to get into the housing market, but has said that high interest rates weren’t the only challenge.

“It's not only interest rates that’s the issue for young people, it's housing prices,” she said.

“There’s nothing we can do about housing prices.”

“There’s criticism that we shouldn't lower interest rates because housing prices will go up.”

‘We’ve got more room to move’

4:20pm

Ms Bullock was asked whether the Reserve Bank was “keeping its powder dry” by holding off on cutting rates.

“We are not keeping interest rates high just in case,” she said. “We are reacting to the domesting inflation data and the employment data.”

However, Ms Bullock said the fact that interest rates remained high meant the bank still had the ability to respond to global economic shocks.

“Everyone knows there is this big chunk of uncertainty out there to do with the trade situation at the moment,” she said.

“If something really bad does happen, we’ve got more room to move, but we’re not deliberately holding interest rates high.”

Why the RBA didn’t temper rate cut expectations

4:03pm

The governor was asked why the Reserve Bank didn’t make efforts to temper rate cut expectations in financial markets, which had priced in a near-certainty of a rate cut in weeks.

“The Reserve Bank can't go out and talk to markets and tell them what the decision is going to be ahead of the board,” Ms Bullock said. “The board has to make the decision.”

“It was inappropriate for me, or anyone in the Reserve Bank, frankly, to go out and say ‘maybe not’, because the board hadn't met.”

‘What we’re waiting for’: August cut on the cards

3:53pm

Ms Bullock has foreshadowed a cut at the next board meeting in five weeks’ time, depending on all-important quarterly inflation data.

“If it comes in as we think it will, continued decline, then that validates our easing path, so that’s what we’re waiting for,” she said.

Ms Bullock also provided further details around the split decision by the board to keep rates on hold.

“The difference in opinion wasn't so much directionally, it was about timing,” she said.

‘Cautious, gradual approach’

3:42pm

RBA governor Michele Bullock is speaking at a press conference following the decision to keep the cash rate on hold at 3.85%.

She said the board felt it was “appropriate to maintain a cautious, gradual approach to easing monetary policy.”

“Quarterly trimmed mean inflation has only been in our 2-3 % target range for one quarter,” she said.

Ms Bullock said the board would have more data on hand by the next rate decision at the August board meeting.

“The board decided to wait a few weeks to confirm that we’re still on track to meet our inflation and employment objectives,” she said.

Michele Bullock announces the RBA's decision on the cash rate

Reserve Bank Governor Michele Bullock. Picture: NewsWire / John Appleyard

Rate hold could slow house price growth

3:19pm

With property markets responding positively to rate cuts so far this year, today’s surprise decision to hold rates steady could keep home price growth in check, according to REA Group senior economist Anne Flaherty.

“Today’s decision to hold may slow the pace of price growth seen in the months following the February and May cuts,” she said.

However, it’s likely that borrowers will still see further rate cuts in the coming months, Ms Flaherty said.

“Most forecasters anticipate further cuts to the cash rate before the end of the year,” she said.

Board split over interest rate decision

3:11pm

The RBA’s post-meeting statement also revealed the voting record from today’s meeting: six members were in favour of holding the cash rate at 3.85%, while three were against.

This is the first time that the bank has made public the results of its vote on the interest rate decision.

‘Heightened level of uncertainty’

3:03pm

The RBA flagged significant uncertainty in the global and domestic economies.

“There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments,” the statement read.

It said trade policy developments “were expected to have an adverse effect on global economic activity”.

The board said there were also uncertainties regarding the lags in the effect of recent interest rate cuts.

“[The board] remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply,” the statement read.

RBA wants more information before cutting rates

2:57pm

In its post-meeting statement, the RBA board said that the risks to inflation had become “more balanced”, and it would wait for more information to confirm that inflation was sustainably settling at the midpoint of the target band before cutting the cash rate further.

“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis,” the statement read.

Governor Michele Bullock to speak imminently

2:46pm

The conclusion of today’s monetary policy meeting will be followed by governor Michele Bullock’s usual address to the media.

The press conference will begin at 3:30pm, with Ms Bullock expected to outline how the board came to the decision to cut the cash rate, and the RBA’s outlook for the months ahead.

Cash rate to remain at 3.85%

2.32pm

The RBA board has decided to leave the cash rate on hold at 3.85% in a surprise move that was not expected by markets and economists.

Financial markets had previously ascribed a 97% chance of a rate cut, with a consensus of economists agreeing that a cut was the most likely scenario.

When is the next RBA board meeting after today?

2:11pm

After today’s meeting, the RBA board will next meet in August, followed by meetings in late September, early November and early December.

The meeting schedule for the remainder of 2025 is as follows:

11–12 August
29–30 September
3–4 November
8–9 December

The August and November meetings are considered most important, as these follow the release of quarterly inflation data which will inform the RBA’s decision making around further rate cuts.

How much would a rate cut save borrowers?

1:46pm

If the RBA cuts the cash rate today by 0.25%, that would reduce monthly mortgage repayments on a $500,000 home loan by about $80, according to Mortgage Choice calculations which assume a current mortgage rate for new borrowers of 5.76%.

For a $750,000 loan, monthly repayments would drop by $120, while the monthly saving for borrowers with $1 million loan would be $160.

Slow economic growth amid global uncertainty

1:31pm

The RBA’s rate decision is set against the backdrop of Australia’s sluggish economy, with weakened consumer demand and subdued wage growth.

Meanwhile, global trade uncertainty has “adversely changed the outlook for growth in Australia’s major trading partners”, the RBA board noted in minutes from its last meeting in May.

In short, the economy isn’t exactly firing on all cylinders, and trade turmoil isn’t helping the situation.

Home prices reach new records

1:16pm

Property markets have already responded to the two rate cuts delivered this year, with prices expected to keep rising if rates are cut further.

Australia’s national median home value reached a record high in June having increased 4.6% in the past year, according to the latest PropTrack Home Price Index.

REA Group senior economist Eleanor Creagh said price momentum has strengthened and extended across the country as interest rates have fallen

“Further interest rate cuts expected later this year will continue to ease borrowing costs, adding to the momentum in housing demand and reinforcing recent price growth,” she said.

Big bank rate predictions

1:02pm

The big four banks are all tipping the RBA to cut the cash rate when the board meeting concludes at 2:30pm today, with further cuts expected this year.

ANZ head of Australian economics Adam Boyton expects back-to-back rate cuts in July and August, although flagged that today’s meeting “will be a much closer call than market pricing would suggest.”

Commonwealth Bank senior economist Belinda Allen said a cut was “not a done deal” but said there was a stronger case to cut rather than leave rates on hold.

Inflation remains tamed

12:47pm

The latest monthly inflation indicator from the Australian Bureau of Statistics shows trimmed mean inflation was 2.4% in the year to May – well within the RBA’s 2-3% target band.

Inflation has remained below 3% since entering the target band in December last year, which opened the door for the easing cycle to begin.

The RBA’s forecast is for inflation to remain at the midpoint of the target band until at least mid-2027.