RBA Cash Rate Held At 3.85%

Why Did The RBA Hold The Cash Rate In July 2025?

While many expected another cut, the RBA chose to pause, saying it needs a bit more time and data before making its next move. This decision was made by a 6–3 majority, showing that even the RBA Board isn’t fully aligned right now.

In the March quarter, trimmed mean inflation came in at 2.9%, within the RBA’s 2–3% target band. Headline inflation also sat at the midpoint of the range, aided in part by temporary cost-of-living relief.

However, more recent monthly data showed inflation was slightly stronger than expected, prompting the Board to wait for the full June quarter CPI to confirm whether inflation is truly on track to settle around 2.5% sustainably.

The Board noted that the cash rate is already 50 basis points lower than it was five months ago, and with broader economic conditions evolving broadly as expected, they judged there was room to pause.

Several ongoing risks influenced the decision:

• Global uncertainty, including unresolved trade tensions and US tariff policies.
• Mixed domestic signals, with household incomes improving but business demand still weak in some sectors.
• A tight labour market, with low underutilisation but weak productivity and high unit labour costs.

While domestic demand has been picking up, the RBA warned that it could grow more slowly than expected, potentially affecting employment.

The Board also flagged uncertainty around how recent rate cuts are flowing through the economy, especially in how businesses set prices and respond to wage pressures.
Looking ahead, the RBA said it will stay focused on the data and is ready to respond if conditions change. It emphasised its commitment to price stability and full employment, and said monetary policy remains well positioned to act if needed.

Our Experts Take On The Board's Decision

Here are what our experts have to say on the cash rate decision.

Today’s RBA hold tells us they’re nervous. Inflation data says to cut, but geopolitics says wait. Between Iran heating up and Trump delaying tariffs, the RBA has chosen caution over action.

The market was betting on a cut, so this hold will catch some off guard. In classic RBA fashion, if they’re unsure, they hold. I’d still expect a cut in the next one or two meetings, but they want more clarity first.

With limited housing supply and strong buyer activity already in play, there’s a real risk first-home buyers will be priced out later this year and into 2026.

Otto Dargan, CEO of Home Loan Experts

So What Does This Mean For You?

For borrowers, it means no immediate relief from current repayments, which will be tough for some. Refinancing will still be super important for those looking to save.

The property market would likely continue on its current, more balanced path, without the immediate stimulus of lower rates. Overall, it suggests the RBA feels current settings are enough for now, or they’re waiting for clearer signs before making another move.

Romy Dhungana, Senior Mortgage Broker

While there’s no change to your repayments for now, some lenders may still adjust their rates behind the scenes. A hold could also help keep the property market steady, which is helpful for buyers still working toward their deposit.

But if a rate cut does land in the next few months, we could see a fast return to competitive lender offers, and renewed pressure on prices.

Manish Rana, Mortgage Broker

How The RBA Cash Rate Affects Interest Rates

Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers.

When the RBA raises the cash rate, lenders often increase their variable interest rates. This means your mortgage repayments go up.

When the RBA cuts the cash rate, lenders may lower interest rates. So, your repayments could go down. However, note that not all lenders pass on the full change.

If the cash rate is unchanged, your repayments usually stay the same. However, lenders can still change rates for other reasons.

Use our rate change calculator to find out what your repayments should look like whenever the cash rate changes.

Upcoming RBA Monetary Policy Board Meeting Calendar 2025

Source: rba.gov.au