RBA governor Michele Bullock defends hold decision
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More news: Reserve Bank governor Michele Bullock has defended the decision to keep rates on hold amid widespread expectations for a cut, continuing to say it's important to ensure inflation returns to the target band.
Bullock, speaking at a post-rate decision press conference on Tuesday afternoon, said the board was maintaining a "cautious, gradual approach" to easing monetary policy.
“I think we’ve done remarkably well,” she said, reflecting on getting inflation down and keeping unemployment low.
“I think this idea of just gradually moving as we see that our forecasts are running in line with the ability to move quickly if we need to,” she said.
“I think we’re in a great position.”
She also rebuffed suggestions from media the RBA is “swinging around” with rate decisions.
When pressed on whether the central bank is leaving itself room to move in case of geopolitical volatility, she said she would not agree with the description the board is keeping its "powder dry" to manage this situation.
“At the moment what we’re focusing on is the domestic economy,” she said.
Rates on hold not what Australians 'were hoping for': Treasurer
More news: Treasurer Jim Chalmers has responded to the shock RBA decision saying it was not what millions of Australians “were hoping for” nor what the markets were expecting amid widespread forecasts for a cut.
In a statement released immediately post-rate announcement, Chalmers said the government had made “substantial and sustained progress” on inflation.
“We’ve seen elsewhere that when central banks cut rates, they don’t always cut at every meeting,” he said.
“The RBA has indicated the direction of travel on inflation and interest rates has been established.”
He acknowledged the uncertainty and unpredictability in the global environment.
The ASX 200 plunged on the announcement and was down 0.24% by 2:44pm AEST.
Vanguard senior economist Grant Feng said in a statement that the RBA was clearly seeking more evidence of weakening demand and progress on disinflation. The Australian Bureau of Statistics is due to publish the quarterly inflation data on 30 July.
“The sustainability of steady disinflation remains uncertain due to the tight labour market and expansionary fiscal policy,” Feng said.
“Additionally, although the global backdrop has delivered big changes and considerable uncertainty since the beginning of April, the US-China trade war truce has significantly relieved growth concerns. Therefore, both domestic and global conditions warrant a cautious policy stance on interest rates.”
Reserve Bank unexpectedly keeps rates on hold
The news: The Reserve Bank has kept rates on hold at 3.85% at its July meeting. This was unexpected by economists and the markets who had expected a 25 basis point cut.
The numbers: The RBA's monetary policy board has now cut the cash rate two times in 2025, down from its cyclical high of 4.35%.
The decision follows 25 basis point cuts in February and May, with inflation data showing the trajectory is better than expected.
The context: Over the past few weeks, economists have responded to weaker-than-expected retail and building approvals data and softer inflation figures by bringing forward their interest rate cut expectations. Some were previously anticipating a cut in August.
The last time the central bank met was shortly following the federal election and amid major uncertainty around US President Donald Trump's tariffs. There has been little communication publicly from RBA officials since this meeting.
The move will shock the markets.
RBA governor Michele Bullock will speak at a press conference at 3:30pm AEST.
The RBA board will make its next rates decision on 12 August.
What they said: "Uncertainty in the world economy remains elevated. While the final scope of US tariffs and policy responses in other countries remains unknown, financial market prices have rebounded with an expectation that the most extreme outcomes are likely to be avoided," the RBA board said in a statement.
"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.
"...Today’s policy decision was made by majority; 6 in favour, 3 against."
The sources: Reserve Bank monetary policy decision statement, Treasurer media release, Vanguard media release
