RBA's interest rates hold sparks warning for mortgage holders: 'No sure thing'

Yahoo

08-07-2025

The Reserve Bank of Australia (RBA) defied expectations by keeping the cash rate on hold at 3.85 per cent at today's meeting. While the central bank has signalled an August interest rate cut is on the table, a top economist has warned borrowers not to expect more after that.
RBA governor Michele Bullock said she understood households had expected an interest rate cut today, but the board had decided to 'wait a few weeks' to confirm inflation was on track. Provided things pan out as expected, she said there would be 'an easing cycle coming'.
Judo Bank chief economist Warren Hogan told Yahoo Finance an interest rate cut had been a 'slam dunk' in terms of market pricing, with around 90 per cent chance of a cut priced in.
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'Although the governor's conference suggests that they're still eying off a cut in August, I think it is a bit of a signal that a series of rate cuts from here is no sure thing,' he said.
Hogan said the RBA was signalling that market expectations of three or four interest rate cuts were not aligned with their current thinking.
'The market's probably getting a little bit ahead of itself in pricing in four,' he said.
'My view is we've probably got a good chance of a move in August and that's also a good chance of being the last cut.
'Rates will probably stay where they are, which is a broadly neutral position from a policy setting point of view that is an RBA cash rate of about 3.5 per cent.'
Hogan noted the economy was in a recovery phase, but it was very gradual.
'The problem for the RBA is if the economy does start recovering while we've got this elevated business cost, the pressure on margins and profits, then businesses may be in a position to start passing those costs through for the course of the next year,' he told Yahoo Finance.
'That ends up pushing inflation up and that would then bring rate hikes back into play.'
While the fall in inflation over the last year has given the RBA confidence to do the first few rate cuts and potentially one in August, Hogan said the next big move in rates would be determined by the next big move in the economy, and this was 'not at all clear'.
AMP chief economist Shane Oliver had been expecting a 0.25 per cent cut today and said the bank continued to see the RBA cutting the cash rate to 2.85 per cent but a bit more slowly.
"While we were wrong in our expectations for a cut in July, and the RBA is proving to be even more gradual than we had come to expect, we continue to see further rate cuts — as we see economic growth picking up more slowly than the RBA is forecasting, underlying inflation is likely to be confirmed around the 2.5 per cent target and monetary policy remains tight," Oliver said.
AMP expects 0.25 per cent rate cuts in August, November, February and May.
The RBA decision was not unanimous, with the board publishing an unattributed record of votes in the post-meeting statement for the first time. Today's decision was made with six in favour of a hold and three against.
'The signal today is that while the majority have voted for this outcome, there are those who thought that there should be a cut, meaning we're close,' Hogan said.
Hogan said he understood why the RBA wanted to keep the votes unattributed so there was no lobbying, but he has called for more information to be available if records of votes are published.
'I would urge them to say when there are votes against the decision, what they would have wanted,' he said.