RBA Holds Cash Rate Steady at 3.85 Percent

Central bank awaits more data before adjusting rates further.

Commuters walk past the Reserve Bank of Australia (RBA) building in Sydney, Australia, on June 7, 2022. Brendon Thorne/Getty Images

The Reserve Bank of Australia (RBA) has opted to keep the cash rate at 3.85 percent, resisting expectations for a July cut.

Citing the need for “a little more information” to confirm inflation is heading toward its 2.5 percent goal, the Board opted for caution as recent rate reductions, global trade uncertainty, and mixed domestic signals continue to shape the economic outlook.

“With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5 percent on a sustainable basis,” the RBA Board said in a statement issued after its July 8 meeting.

The decision follows two reductions earlier this year, in February and May, which brought the rate down from the peak of 4.35 percent, its first downward move since late 2020.

Global Uncertainty Looms Over Economic Outlook

The RBA flagged continued volatility in the global environment, particularly in relation to tariff uncertainty.

“While the final scope of U.S. tariffs and policy responses in other countries remains unknown, financial market prices have rebounded with an expectation that the most extreme outcomes are likely to be avoided,” the board said.

Nonetheless, the bank warned that trade disruptions could still weigh on global growth, and uncertainty may cause households and businesses to delay spending and investment decisions.

Mixed Domestic Signals on Inflation and Labour

While Australian household demand has shown signs of improvement and financial stress has eased slightly, not all sectors are recovering equally. The board noted that real incomes are growing and some indicators of financial pressure have softened.

However, it acknowledged that “businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.”

On the employment front, labour markets remain tight, with low underutilisation rates and continued constraints on workforce availability across many industries.

Wages growth has moderated from its peak, but productivity gains remain elusive, leading to persistently high unit labour costs.

Looking ahead, the RBA expressed caution over how quickly domestic demand might recover and whether this would be sufficient to sustain current employment levels.

The board said it would closely monitor economic data, including trends in consumer spending, inflation, and employment, before making future rate decisions.

“The Board will be attentive to the data and the evolving assessment of risks to guide its decisions,” it said.

Its priority, it reiterated, remains price stability and full employment.