The RBA’s decision to hold rates isn’t a calamity, but its shift in language is confounding – and worrying

The Reserve Bank of Australia (RBA) unexpectedly held its official cash rate at 3.85%, surprising financial markets that had anticipated a rate cut. While the RBA governor implied a cut is likely after the August meeting, the decision and a perceived shift in the RBA's language regarding inflation have eroded trust. Despite softer-than-expected May inflation data (2.4% underlying inflation), the RBA stated it was "slightly stronger than expected" and wants to wait for June quarter data. The author expresses concern over the RBA's inconsistent communication and its interpretation of economic data, particularly weak consumer demand, and the potential impact of US tariff policy. The decision to hold rates passed 6-3, raising questions about the influence of RBA officials.

1. 1 Seven weeks ago (May): RBA adopted a surprisingly dovish tone, considering a 50 basis point cut.
2. 2 Tuesday (recent): RBA held official cash rate at 3.85%.
3. 3 August meeting: RBA governor implied a rate cut is likely after this meeting.
4. 4 June quarter: Data expected to be released, which RBA is waiting for.

• Financial markets were unnerved
• Erosion of trust in the RBA due to inconsistent communication
• Mortgage holders continue to face higher rates
• Potential for further undermining of confidence in RBA decision-making if August cut doesn't materialize