The Reserve Bank of Australia has decided against slashing the cash rate for a third time in 2025, in a move unlikely to please borrowers keen for another round of mortgage relief.

The RBA’s monetary policy board emerged from its two-day July meeting to reveal, against predictions from key economists, that the cash rate would remain unchanged at 3.85 per cent.

WATCH THE VIDEO ABOVE: Shock as RBA keeps rates on hold.

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The decision was made by a majority (six in favour and three against), the board said.

“I understand that households with mortgages are very keen to interest rates decline because it helps them with their cash flow, so I’m very conscious of that,” RBA governor Michele Bullock said.

“I’m also really conscious that we don’t want to end up having to fight inflation again — we want to make sure we’ve nailed it.”

Bullock said the difference in the two camps — board members who wanted to hold and the three that wanted to cut the cash rate — was not direction, “it was more about timing”.

Tuesday’s hold comes after the RBA shifted the dial down from 4.35 per cent in February, the first time it had moved in four years, and again in May, from 4.10 per cent to 3.85 per cent.

Why did the RBA keeps rates on hold?

The board said that while recent CPI data suggests that June quarter inflation is likely to be broadly in line with its forecast, “they were, at the margin, slightly stronger than expected”.

“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 per cent on a sustainable basis,” the board said.

That information to be pored over before their next meeting on August 11-12 includes the “June quarter CPI, another market reading, further information about international developments and an updated set of forecasts”.

The board said “uncertainty in the world economy remains elevated”, but that the “most extreme outcomes” from Trump’s tariffs “are likely to be avoided”.

“Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending greater clarity on the outlook,” the board said.

The board said inflation risks “have become more balanced” and the labour market is strong, but it “remains cautious about the outlook” given uncertainty with aggregate demand and supply.

‘Not the result millions were hoping for’

Treasurer Jim Chalmers said today’s decision was “not the outcome that millions of Australians were hoping for or the outcome that economists or the market (were) expecting”.

“I don’t second-guess decisions taken independently by the Reserve Bank. I think it’s a good thing that the governor has the opportunity to run the country through the board’s thinking in coming to that decision,” he said.

“The Reserve Bank’s statement makes it clear that we’ve made substantial and sustained progress in the fight against inflation and that is why interest rates have already been cut twice in the last five months.”

He said those two cuts were “providing relief to millions of Australians with a mortgage”, but Bulloch said “the effects of (the cuts) are still to flow through to the economy”.

“We’ve seen that when central banks cut interest rates around the world, they don’t necessarily cut at every single meeting but it is clear now the direction of travel on inflation and interest rates has been established,” Chalmers said.

Canstar said Australians had been “blindsided” by the RBA’s move to leave the cash rate on hold.

“The Board has said Australia is making good progress in the fight against inflation however it clearly isn’t prepared to fire off a rate cut without the next round of quarterly inflation results in its back pocket,” the financial comparison site’s data insights director Sally Tindall said.

“Holding until at least the next meeting gives the board time to better assess the impact of the previous two cuts.

“Data out this week from CBA, which shows the majority of borrowers have reinvested the last couple of cuts into their mortgage, is a strong indication that rate cuts will take longer than expected to filter through the economy.

“Yes, it’s disappointing and entirely frustrating, but if you’ve got a variable mortgage, you don’t have to just sit back and cop it.”

Tindall said borrowers should phone their bank now to negotiate “your own personalised rate relief”, or consider refinancing with another lender.

“This decision today from the RBA doesn’t put a ruler through the possibility of further cash rate cuts, so if you can lock in a cut of your own today, and we get a cash rate cut further down the track, you’ve effectively secured yourself a double cut,” she said.

RBA beats to its own drum

Harry Murphy Cruise, head of economic research and global trade for Oxford Economics Australia, said the RBA “beats to its own drum, not the market’s”.

“It was widely expected that the RBA would cut the cash rate to 3.6 per cent at today’s monetary policy meeting; implied market pricing put the odds near 100 per cent,” Cruise said.

“Instead, the board opted to hold, citing the still-strong labour market and a need to see confirmation in upcoming CPI data that inflation is easing as expected.”

Weighing up the global uncertainty and good news on inflation, Cruise said “in our view ... (it) warranted a rate cut at today’s meeting”.

“Yes, the domestic economy has pockets of strength and unemployment is low, but we’d rather see momentum build in the economy ahead of a potential storm than risk being caught flat-footed if conditions sour,” he said.

Case to cut rates ‘never compelling’

Despite expectations from most that the RBA would trim rates, not all were on board.

“As I have consistently argued in recent weeks, the case to cut rates today was never compelling,” said David Bassanese, chief economist at BetaShares.

“While consumer spending remains stubbornly weak, the labour market remains strong. And while the recent monthly CPI report showed a large decline in annual trimmed mean inflation to 2.4 per cent, monthly reports are notoriously volatile.

“Only the month prior, trimmed mean annual inflation was at 2.8 per cent.

“To my mind, the RBA would wait for the more reliable quarterly CPI report later this month to confirm a decline in underlying inflation before cutting rates again in August.

“This is very much a rate cut delayed not denied – the millions of Australian mortgage holders have only a few weeks to wait for relief.”