The Reserve Bank of Australia (RBA) has decided to maintain interest rates.

In a widely unexpected move, the nation’s central bank has kept the official cash rate at 3.85% during its July meeting on monetary policy, citing continued global uncertainty as the main driver.

“Uncertainty in the world economy remains elevated,” the Board wrote in its decision. “While the final scope of US tariffs and policy responses in other countries remains unknown …Trade policy developments are nevertheless still expected to have an adverse effect on global economic activity, and there remains a risk that households and firms delay expenditure pending greater clarity on the outlook.

“The Board continues to judge that the risks to inflation have become more balanced, and the labour market remains strong,” the decision continued. “Nevertheless, it remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply. The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis.”

The majority decision was six in favour of a hold, and three against. The market did not anticipate the hold. All four of Australia’s Big Four banks — ANZ, Commonwealth Bank (CBA), National Australia Bank (NAB) and Westpac — were anticipating that the RBA would cut rates. Meanwhile, mortgage holders and investors, many of whom have been feeling the pinch of rising costs of living, were hoping for some added relief from the central bank, thanks to falling inflation and easing economic growth.

In fact, recent employment numbers and price stability seemed to be promising. Inflation eased to a three-year low, according to March 2025 consumer price index (CPI), the most recent quarterly data available. The trimmed mean, which filters out volatile swings, dropped to 2.9%, landing squarely within the RBA’s 2% to 3% target band. At the same time, unemployment remains low at 4.1%.

Some banks have been preparing for the RBA’s upcoming announcement by dropping variable and fixed interest rates of their own. A competitive lending environment is a win for existing homeowners.

Still, global uncertainty has been keeping markets on edge. Some industry players worry that ongoing tariff threats, turmoil in the Middle East and recessionary fears give the RBA good reason to pause before making another move.

Adding to the mix, US President Donald Trump recently slapped a 20% tariff on Vietnamese exports — a walk-back from the 46% floated during April’s Liberation Day. While Australia isn’t directly affected, the move could disrupt regional supply chains, particularly in China, a key source of Aussie imports, which could potentially push up costs over time.

The RBA has already cut interest rates twice in 2025, once in February and in May. Its next meeting is scheduled for 12th August.