RBA Holds Rates Steady as Global Uncertainty Persists and Housing Momentum Builds

The Reserve Bank of Australia (RBA) has chosen to keep the cash rate on hold at 3.85 per cent in its July meeting, defying widespread market expectations of a rate cut. With global trade tensions easing slightly and domestic inflation showing signs of stabilisation, the central bank appears to be adopting a cautious approach as it monitors both local and international economic trends.

Leading into the meeting, financial markets had priced in a 96 per cent chance of a 0.25 percentage point cut. Forecasts from economists also leaned heavily towards a reduction, largely influenced by softer-than-expected inflation data in May and slowing GDP growth in the first quarter of the year.

However, in its post-meeting statement, the RBA indicated it is seeking more confirmation that inflation is tracking sustainably toward its 2.5 per cent target before making any further changes. It noted that while price pressures are easing, more time is needed to assess the full impact of recent policy shifts.

This decision follows earlier rate cuts in February and May, after the cash rate had remained at 4.35 per cent from November 2023. That period marked the end of a series of 13 consecutive hikes that began in May 2022.

Not a Unanimous Call

This month’s decision was not unanimous. For the first time, the RBA disclosed the vote split, with six members in favour of holding the rate steady and three voting for a cut. This division reflects the level of uncertainty within the board and mirrors the broader economic ambiguity both in Australia and globally.

The RBA also highlighted ongoing risks in the international landscape, particularly around trade policy. Although the United States has extended its pause on new tariffs until August 1st, offering short-term relief to global markets, the potential impact on China—Australia’s largest trading partner—remains a key consideration for future policy settings.

Housing Market Still Gaining Momentum, Especially in Perth

Despite the pause in rate cuts, Australia’s housing market continues to show strong performance. All major capital cities are currently experiencing growth, with Perth standing out as the strongest performer. The city recorded a 1.3 per cent rise in property values over the past month, driven by tight supply, strong demand, and growing interest from interstate buyers.

Melbourne and Sydney are also regaining momentum, each posting 0.5 per cent monthly growth. Nationally, the median house price has climbed to $941,000, while units have reached $695,000. On an annual basis, house prices are up 7.0 per cent and units have risen 5.2 per cent.

While the RBA’s decision may be seen as a short-term pause, markets are still anticipating up to three rate cuts before the end of the year. For now, the central bank appears focused on monitoring economic data and global developments before taking its next step.