By Australia’s central bank stunned investors on July 8 by holding its cash rate at 3.85%, defying nearly unanimous forecasts for a cut. The Reserve Bank of Australia (RBA) said its board preferred to wait for stronger confirmation that inflation is sustainably declining.
The announcement triggered immediate market reactions. The Australian dollar surged about 0.8% to $0.6543, while three-year bond futures dropped tradingview.com+2reuters.com+2investing.com+2. Following the move, market activity showed an 88% probability of a cut to 3.60% at the RBA’s August 12 meeting, and projections suggest ultimate rates will bottom around 3.10%, instead of the previously expected 2.85%.
While markets had priced in near certainty of a July cut—driven by May’s easing inflation—RBA officials argued that global uncertainty, including impacts from U.S. tariffs, justified delaying action money.usnews.com+15reuters.com+15investing.com+15. The decision was close, with six members voting to hold rates and three dissenting.
RBA Governor Michele Bullock clarified the board’s position, indicating the pause reflects a matter of timing, not direction—a stance underscored by her comment that they needed confirmation from the upcoming July quarterly inflation data to validate further easing.