In a move that surprised many commentators, the Reserve Bank of Australia (RBA) held the cash rate steady at 3.85% in July. A show of caution over action, amid mixed economic signals. Despite headline inflation easing within the RBA’s target band, concerns over economic fragility and employment softness prompted the central bank to delay a widely expected cut.

Why the RBA waited

• The Board is awaiting June quarter CPI data to assess whether inflation stability is sustainable
• Australia’s labour market is showing early signs of softening, and business confidence has dropped slightly
• Consumer spending remains muted, especially among mortgage holding households, which has led some economists to call for a rate reduction to spur activity.

Potential impacts

The interest rate hold means ongoing pressure on loan repayments and cash flow, particularly for those with variable debt or finance leases. Businesses relying on consumer discretionary spending may continue to feel the squeeze. The hold does however give business owners time to prepare. Analysts expect a possible cut in late Q3 or early Q4 if data trends continue potentially providing breathing room ahead of the holiday period. Given where things are at it’s a good time to review your debt exposure, optimise cash flow and consider refinancing options.



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