The Reserve Financial institution of Australia (RBA) shocked markets at the moment by retaining the money fee 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 monitor 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 affect of US tariff insurance policies
- Tight labor market circumstances regardless of financial softening
- Lags in financial coverage transmission
- Combined indicators on home demand restoration
Markets had priced in roughly 74 foundation factors of cuts by year-end earlier than at the moment’s determination, and the RBA’s language suggests additional cuts stay doubtless 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
Overlay of AUD vs. Main Currencies Chart by TradingView
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 speedy response was bullish for AUD, merchants ought to notice 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 course of fee 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 each 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 quite than a elementary shift within the coverage outlook. With 4 extra conferences remaining in 2025, there’s nonetheless ample alternative for the RBA to ship extra easing if financial circumstances warrant.
