RBA ramps up drive to shape Australia’s economic thinking

RBA ramps up drive to shape Australia’s economic thinking

The Reserve Bank of Australia (RBA) has delivered a surprise decision by holding its official cash rate steady at 3.85% in its July meeting, defying market expectations of a near-certain cut to 3.60% [1]. The RBA's decision comes amidst a backdrop of global trade tensions, with President Trump reigniting his trade war by threatening punishing tariffs on U.S. trade partners [1].

The RBA's decision was a shock to financial markets and experts who had anticipated a second consecutive rate cut, given weak economic growth, inflation at 2.1%, and concerns over the impact of Trump's trade war on the global economy [2]. The RBA's monetary policy statement noted that the board will remain attentive to data and evolving risks, indicating a cautious approach to further rate cuts.

The AUD/JPY cross has gained strength, reaching near 95.50, following the RBA's decision to keep rates unchanged [3]. The Australian Dollar (AUD) has attracted buyers against the US Dollar (USD) in response to the RBA's move. Meanwhile, the Bank of Korea is expected to hold its policy rate steady at its July meeting, with economists forecasting no rate change amidst uncertainties over U.S. tariffs, exports, and the pace of growth [3].

The RBA's decision to hold rates steady is part of its broader strategy to shape Australia’s economic thinking. The central bank has been cautious in its approach to monetary policy, aiming to ensure price stability and contribute to the stability of the currency, full employment, and economic prosperity [3]. The RBA's decision to keep rates steady is a signal that it is prepared to wait for more information before making further adjustments to monetary policy.

The RBA's governor, Michele Bullock, will hold a press conference later on Tuesday to provide more details on the central bank's decision and its implications for the Australian economy. Investors and financial professionals will be closely watching her remarks for any indications of the RBA's future policy direction.

References:
[1] https://www.morningstar.com/news/dow-jones/202507082632/australias-central-bank-surprises-with-a-hold-trump-reignites-trade-war
[2] https://www.theguardian.com/australia-news/2025/jul/08/rba-interest-rates-reserve-bank-australia-cash-rate-meeting-july
[3] https://www.fxstreet.com/news/aud-jpy-edges-higher-to-near-9550-as-rba-holds-cash-rate-steady-at-385-202507080442