In an unexpected move, the Reserve Bank of Australia has decided to hold the cash rate at 3.85%.
The decision was made despite widespread market expectations of a rate cut, with financial markets pricing in a 97% probability of a reduction today.
At today’s meeting, the RBA Board voted 6 to 3 in favour of keeping rates unchanged.
This marks the first time the Board has provided a breakdown of the votes, highlighting the differing views among members and just how closely contested the decision was.
Inflation has been moderating, as the RBA noted, “inflation has fallen substantially since the peak in 2022,” and underlying inflation is currently within the target range of 2-3%,
Key comments from the RBA explaining the decision were:
- The Board continues to judge that the risks to inflation have become more balanced and the labour market remains strong.
- 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 per cent on a sustainable basis.
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