Mortgage holders hoping for back-to-back rate cuts will need to wait a little longer. The Reserve Bank of Australia (RBA) has held the official cash rate steady at 3.85% in its July 2025 meeting, defying widespread market and economist expectations of another cut.

Leading into the meeting, there was a 92% chance priced in by financial markets for a 0.25% cut. Weaker-than-expected inflation figures and soft retail spending had many forecasting further relief—but the RBA opted to wait.

Why the Hold?

In its statement, the RBA acknowledged inflation is easing, but said it needed “a little more information” before committing to further cuts. The board cited ongoing uncertainty in the global economy, including potential ripple effects from international tariffs and policy shifts.

Domestically, the RBA noted that household incomes are gradually improving and financial stress indicators are easing. However, there’s still enough uncertainty around inflation and overall economic momentum to justify holding off—for now.

“Uncertainty in the world economy remains elevated,” the board said. “There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments.”

What’s Next?

The July pause follows a rate cut in May, and while today’s decision rules out a second consecutive cut, all eyes now turn to the June quarter CPI data due later this month. If inflation continues to ease, a cut could still be on the table for August.

Economists like Betashare’s David Bassanese had warned that a single month of lower inflation wasn’t enough. He described the current situation as giving the RBA only a “yellow light” for further easing—pending confirmation from more comprehensive data.

Meanwhile, employment remains strong, with the unemployment rate holding steady at 4.1%, near historic lows.

What Should Borrowers Do?

With the cash rate still well above pre-2022 levels, now’s the time for homeowners to reassess their loan. Whether it’s locking in a more competitive rate or adjusting your loan structure, proactive steps could help reduce the strain of higher repayments.

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