Holding Back the Cut: Why the RBA Kept Rates Steady in July—and What It Means for Australians
Australians Expected Relief—The RBA Delivered Restraint
In a surprising turn of events, the Reserve Bank of Australia (RBA) has opted to keep the official cash rate steady at 3.85% in its July 2025 meeting, resisting market pressure and widespread economic expectations of a cut. The decision, backed by a 6-3 vote, defied a 92% consensus among market economists predicting a reduction.
At the centre of the debate is RBA Governor Michele Bullock, who has repeatedly emphasised the importance of data-led policymaking, particularly the upcoming June quarter CPI figures due July 20. “Directionally, we expect rates to fall,” Bullock explained in her post-meeting address, “but we want confirmation that inflation is consistently tracking towards the mid-point of our 2–3% target range.”
It’s a wait-and-see stance—deliberate, cautious, and data dependent.
A Vote Without Attribution: Shielding the Board from Lobbying
Notably, Bullock declined to reveal her personal vote in the board’s split decision, defending the RBA’s new policy of anonymised voting to protect members from lobbying pressures and allow for free internal debate. Critics argue this opacity hinders public accountability, but Bullock maintained it was vital to preserve candid internal discussions.
The change marks a cultural shift within the central bank’s leadership—perhaps a nod to international central banking norms, but jarring in a domestic context where transparency is increasingly expected.
Why the June Quarter CPI Matters So Much
So, why the hesitation?
The March quarter’s inflation figure landed at 2.4%—within the RBA’s comfort zone—but it was a single data point. “We want confirmation with a full quarterly CPI,” Bullock reiterated. “That’s the reason we’re waiting.”
The CPI figures, due later this month, will determine whether this pause is just that—or a policy plateau. If inflation continues to decline in a sustainable way, August could deliver the cut homeowners are hoping for.
Markets React: Frustration, Disappointment, and a Glimmer of Hope
The response from financial commentators and consumers has been swift.
“This was a cruel blow for borrowers,” said bRight Agent co-founder Aaron Scott. “It’s not enough to provide relief, but it would’ve signalled hope. Nobody’s breaking out the Wagyu or Shiraz tonight.”
REA economist Anne Flaherty noted the hold may dampen property price momentum, especially after the gains seen post-February and May cuts. “Prices are up 3.2% year-to-date—$26,000 on average. But many households remain financially stretched.”
Sally Tindall from Canstar called it a “blindsiding” move, advising Australians with variable loans to take matters into their own hands. “Don’t wait. Negotiate with your lender. Some lenders are still offering variable rates under 5.5%, well below the average 5.8%.”
The Political and Economic Crosscurrents Behind the Hold
The RBA’s official statement outlined a complex cocktail of global uncertainty, geopolitical risk (including US trade tariffs), and lingering domestic headwinds as reasons for caution. The Board acknowledged:
Strong labour market conditions
Gradual recovery in household incomes
Risks of delayed spending due to policy uncertainty
“While inflation is falling, we need more information,” the Board stated. “There are also uncertainties around how quickly recent rate cuts filter through to the economy.”
Some saw this as prudence; others, as missed opportunity.
Economists Weigh In: Was a Cut Justified?
David Bassanese from Betashares was among those who cautioned against premature easing. “The trimmed mean dropped to 2.4%, but the month before it was 2.8%. Monthly figures are volatile. Prudence suggests waiting for the quarterly report.”
Russel Chesler at VanEck echoed this, warning against overreliance on optimistic market sentiment. “The job market is still tight, and monetary policy lags. Markets are racing ahead of reality.”
Yet Deloitte’s Pradeep Philip argued the opposite. “With inflation down and global growth slowing, a rate cut would have been a sensible form of insurance. Business confidence and investment remain Australia’s greatest economic hurdles.”
Philip forecast an additional 100 basis points of rate cuts through 2025 and 2026, with the need to support business investment as inflation cools.
The Human Cost of Waiting
While economists debate theory and projections, millions of Australians are dealing with very real financial stress. Mortgage holders—especially those who rolled off fixed rates in recent months—were hoping for relief that didn’t arrive. And while the RBA has hinted at cuts to come, the cautionary tone means Australians will continue tightening belts until there’s hard data in hand.
Bullock was asked whether rate policy is exacerbating the housing crisis, especially for younger Australians trying to enter the market. Her response was sobering. “Interest rates aren’t the only issue—it’s house prices. We can’t do anything about that.”
That comment encapsulates the RBA’s constrained mandate and the broader limitations of monetary policy. Rates can shift borrowing costs, but they can’t fix structural housing issues.
Looking Ahead: All Eyes on August
August 12 is now circled on every economist’s calendar. That’s when the RBA next meets. Between now and then, the inflation data will determine whether this pause turns into action.
The RBA’s stance may be justified. But it’s cold comfort to Australians juggling bills, rent, and rising grocery prices. For many, another month of waiting might feel like an eternity.
Conclusion: Data Over Desire
The RBA’s July decision to hold the cash rate reflects a disciplined approach to monetary policy. While unpopular with many borrowers and market watchers, the move underscores Governor Bullock’s commitment to evidence-based decision-making in an uncertain global environment.
Whether Australians see this as restraint or inaction may depend entirely on what the June CPI figure says. But one thing is clear: the path to relief will be cautious, not reactionary.
Author Bio:
Abel Kalpi Nand Prasad is the founder of Renown Lending, a non-bank lender focused on supporting real Australian businesses. With 25+ years in banking and private finance, he shares commentary on economic trends, private credit markets, and the human side of money on Medium and LinkedIn.
