The Reserve Bank of Australia’s Board of Directors surprised markets at its meeting this morning, Tuesday, July 8, by keeping monetary policy unchanged, contrary to expectations. The Board kept interest rates at 3.85%, while expectations had been for a 25 basis point cut, bringing them to their lowest level since May 2023.
The Bank’s interest rate statement stated that inflation continued to moderate and had declined significantly since its peak in 2022, with average inflation reaching 2.9%.

The baseline forecast for May indicated that core inflation would continue to moderate, reaching the midpoint of the 2-3% target range. However, inflation figures for the quarter ending in June were marginally higher than expected, and the Bank therefore decided to await further information to confirm the continued path of inflation towards 2.5% on a sustainable basis.

The Board emphasized that inflation risks have become more balanced and upside risks have diminished, and that the Board will pay close attention to data and the evolving assessment of risks to guide its decisions.

At the press conference following the bank’s decision, Bank Governor Michelle Bullock confirmed that the disagreement with members today was over timing, and that the bank was continuing its path of easing monetary policy.

The bank’s decision today was made by a majority vote of six members, with three against. Australian Treasurer Chalmers noted after the meeting that the country had made significant and sustained progress on inflation, and that today’s move by the bank was not the outcome millions of Australians had hoped for.