Here’s a comprehensive news-style article on the RBA’s stance:
RBA Holds Rates Steady at 3.85% Amid Watchful Eye on U.S. Tariffs
Sydney – July 9, 2025 — At its July 8 meeting, the Reserve Bank of Australia (RBA) opted to maintain its official cash rate at 3.85%, surprising markets expecting a cut to 3.60%. Deputy Governor Andrew Hauser emphasized the bank’s vigilance regarding escalating U.S. tariff developments and other global uncertainties.
🔍 What Shaped the Decision?
- U.S. Tariff Spillover
Hauser noted that although Australia has yet to see major economic fallout, the effects of U.S. tariffs are still unfolding. Crucially, consumer and business sentiment in Australia have held up better than in the U.S. or Europe. - Internal Policy Split
The decision passed by a 6–3 board vote, a rare display of divergence, signaling caution over inflation trends and global pressures. - Inflation & Data Dependency
With monthly CPI within the 2–3% target, but slightly above forecasts (May at 2.4%), the RBA reserves judgment pending the full Q2 inflation figures and new forecasts slated for late July .
💬 Key Takeaways
- Cautious Tone, Dovish Outlook
Governor Michele Bullock downplayed the pause as a calibration, not a reversal, of the easing cycle. Markets still anticipate a rate cut—potentially in August, depending on inflation clarity . - Economic Prospects vs. Tariff Risks
While Australia’s financial system remains sound—with low household leverage and resilient labor markets—the RBA flagged that a prolonged U.S.–led trade war could erode growth and push inflation unpredictably . - Broader Economic Framework
Domestically, consumer spending remains muted and unit-labor costs are stable. But global developments—especially U.S. trade policy—are weighing heavily on the RBA’s forward-looking strategy .
🧭 Looking Ahead
- Inflation Watch: The June-quarter CPI release (due around July 20) will be central to any forthcoming policy moves, with the August meeting potentially offering the first chance for a rate cut.
- Tariff Developments: The RBA will continue monitoring policy moves in Washington, including possible pharmaceutical and automobile tariffs, and any trade tensions involving China.
- Market Reaction: The surprise hold lifted the Australian dollar ~0.8%, while government bond futures fell—reflecting market surprise and recalibrated rate expectations .
- Global Balance: With uncertainties—from geopolitical tensions to slowing demand in major economies—the RBA’s message is stark: data-driven patience remains the cornerstone of its monetary strategy.
Summary
The RBA’s decision to hold rates at 3.85% demonstrates cautious vigilance. While domestic inflation has cooled, global risks—chief among them U.S. tariffs—complicate the outlook. As the RBA awaits further data, especially the June-quarter CPI, its next move likely hinges on a delicate balance: supporting economic momentum while keeping inflation firmly in check.