By 
The Reserve Bank of Australia (RBA) has opted for a cautious approach to monetary easing, choosing to hold interest rates steady in July rather than proceed with a third cut in four meetings. This decision underscores the central bank’s commitment to a gradual and measured policy path, according to minutes from the July 7–8 policy meeting released on Tuesday.
The board noted that while the current cash rate of 3.85% remains “modestly restrictive,” there is still uncertainty about how much room exists to lower rates before reaching a neutral level. A majority of the nine-member board expressed that easing rates too quickly would not align with the RBA’s deliberate strategy.
“Members observed that it might be prudent to lower interest rates cautiously as the required degree of policy restrictiveness declines,” the minutes revealed.
Three board members, however, supported a rate cut, arguing that inflation is on track to return to the central bank’s target range sustainably, and that further policy easing could be justified without delay.
The RBA’s decision surprised financial markets, which had largely anticipated a cut following a monthly inflation report showing the trimmed mean inflation rate—closely watched by the RBA—falling to 2.4% in May, its lowest in over three years. Additionally, the Australian economy showed minimal growth in the first quarter, largely due to weaker public sector demand.
Despite market expectations, the RBA emphasized the value of awaiting further data, particularly the upcoming quarterly inflation figures, before taking additional action. The board also noted that some economic indicators, such as private sector demand and labour market conditions, were performing better than anticipated.
“Even though growth was subdued, a stronger-than-expected pick-up in private demand and the resilience of the labour market support the case for patience,” the central bank noted.
The board also highlighted that monthly inflation metrics can be volatile, and sectors such as housing could lead to higher-than-expected figures in the June quarter. Furthermore, global economic risks have somewhat diminished, although geopolitical uncertainties, including U.S. trade policies, remain unpredictable.
Looking ahead, market participants now assign a 91% probability that the RBA will cut rates at its next policy meeting scheduled for August 12. This sentiment has been bolstered by a weaker-than-expected employment report, raising concerns that Australia’s labour market may be losing momentum.
Futures trading suggests that interest rates could fall to around 3.10% by early 2026, as the central bank balances inflation control with the need to support economic growth.
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