FX.co ★ Australia Unexpectedly Keeps Cash Rate

The Reserve Bank of Australia decided to keep its cash rate unchanged at 3.85% during its July meeting, going against market expectations of a 25 basis point reduction. This decision was reached with a majority vote, where six members supported it and three opposed it. The central bank highlighted a more balanced perspective on inflation risks and a strong labor market as primary justifications for maintaining the current policy stance. Nonetheless, the board remains vigilant about the economic outlook amid uncertainties in both aggregate demand and supply. Policymakers expressed their intention to await further data to ensure inflation is on a sustainable path back to the 2.5% target. They also underscored that the monetary policy framework remains equipped to respond decisively if global events severely affect domestic activity or inflation. The Reserve Bank emphasized its commitment to staying attuned to incoming data and evolving risk assessments, with a focus on global and financial conditions, domestic demand trends, and the projections for inflation and the labor market.