No cut: RBA keeps cash rate at 3.85% in July
The Reserve Bank of Australia (RBA) has kept the cash rate unchanged at its latest meeting, despite all of the Big Four banks, most economists and the ASX futures market predicting a cut.
This marks the second time Australia's central bank has held the cash rate steady in 2025, after the first cut in four years in mid-February, a hold in April and a second cut in May.
What does this mean for borrowers?
Today’s decision means prospective buyers may be considering where to park their home deposit if they're holding off buying property until another cut is announced, while existing mortgage holders may be considering refinancing options.
Why didn't the RBA cut?
In its statement on monetary policy , the RBA said risks to inflation have become more balanced and the labour market remains strong. The Board judged that it could wait for a little more information to ensure inflation remains on track to sustainably hit 2.5 per cent. It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.
For the first time ever, the Board published an unattributed record of votes in its post-meeting statement, revealing July's policy decision was made by majority; 6 in favour and 3 against.
What did the data say?
Monthly CPI data reveals inflation rose 2.1 per cent in the 12 months to May, while the most recent quarterly CPI figures (see chart below) shows annual inflation rose 2.4 per cent – its lowest level since March 2021 – driven by declining goods prices and stabilising services inflation. Additionally, underlying inflation (trimmed mean) was 2.9 per cent in the March quarter, down from 3.3 per cent in the December quarter.
Annual GDP growth has slowed to 1.3 per cent, according to the latest national accounts release, highlighting weaker economic momentum across both consumer and business sectors. While employment remains resilient – with the unemployment rate holding steady at 4.1 per cent in May – broader labour market slack is emerging as participation increases and job creation thins.
Retail trade has shown signs of stagnation, with minimal growth in the early months of 2025. Australian retail turnover rose 0.2 per cent in May, following a flat result last month and growth of 0.2 per cent in March, signalling cautious consumer spending despite population growth.
Economists are divided over how many cuts may follow. Meanwhile, three of the Big Four banks are forecasting further cash rate reductions before the end of 2025.
When will the RBA cut rates again?
Borrowers are still hoping for further relief, pondering if and when will the RBA move again? The Board said future decisions will depend on changes in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
"While expectations may be that there'll be more cuts coming over the remainder of this year, I don’t think we can be too confident about the number and timing of any further cuts yet given the cautious approach that the RBA typically adopts.”
– Mozo banking expert Peter Marshall
See our Interest Rate Tracker to learn which providers pass on rate cuts – and which don’t.
Read last month's Reserve Bank interest rates update.
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