The Reserve Bank of Australia has held rates at 3.85%, in a surprise decision that denies further mortgage relief for millions of Australian households.
The decision will come as a shock to financial markets and a large majority of experts who were sure the RBA board would cut interest rates for a second straight meeting.
Weak growth at the start of the year, inflation at 2.1%, and serious worries about the impact of Donald Trump’s trade war on the global economy were all cited as reasons for a third rate cut of 2025.
The RBA board was split on the decision, with six voting in favour of keeping rates on hold, and three against, shifting away from recent consensus decisions.
The monetary policy board said in a statement that it could “wait for a little more information to confirm that inflation remains on track”.
A potential cut in August will now rely on whether quarterly consumer price data due out at the end of the month shows inflation is under control.
The Australian dollar shot up immediately after the decision to US65.5c, up from US65.15 before the announcement.
The treasurer, Jim Chalmers, said it was “not the result millions of Australians were hoping for”.
“We have made substantial and sustained progress on inflation which is why interest rates have already been cut twice in five months this year,” Chalmers said.
“We’ve seen elsewhere that when central banks cut rates, they don’t always cut at every meeting.”
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The decision to hold will give the RBA more time to weigh up any further fallout from Donald Trump’s tariff regime and its shifting timelines.
Krishna Bhimavarapu, economist at State Street Investment Management, said the decision was “a little perplexing” given weak momentum in the economy.
He said the cash rate could still reach 3.1% by the end of the year, “with the possibility of a larger cut in August now in play”.
More details soon …
