Australian Dollar Jumps as RBA Shocks Markets

July 8, 2025 - Written by Tim Boyer

STORY LINK Australian Dollar Jumps as RBA Shocks Markets

The Reserve Bank of Australia held interest rates at 3.85% at the latest policy meeting compared with consensus forecasts of a further 25 basis-point cut to 3.60%.

The Pound to Australian dollar (GBP/AUD) exchange rate slumped to 2.0850 from 2.0960 ahead of the decision.

The Australian dollar to Dollar (AUD/USD) exchange rate surged to 0.6550 from 0.6490.

MUFG commented; “The next RBA policy meeting is on 12th August and by that time the Australian CPI report for Q2 will have been released which without any major upside surprises should allow the RBA to resume rate cuts next month.”

MUFG has a year-end GBP/AUD forecast of 2.11.

A large majority of analysts had expected rates to be cut at this meeting and there was a split 6-3 decision with the minority calling for rates to be cut at this meeting.

According to the statement; "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.”


Justifying the decision Governor Bullock commented; “The two monthly CPI (consumer price index) indicators have been broadly consistent with our forecast for headline inflation and show that we’re moving in the right direction. However, some components suggest that underlying inflation in the June quarter could be a little higher than our forecast.”

Several banks disagreed with the decision.

AMP's deputy chief economist Diana Mousina commented; “I think that the decision by the Reserve Bank was the incorrect decision and fundamentally it seems like it was down to the Reserve Bank not putting as much focus or attention as we thought that they might have on the monthly inflation indicator.”

Most analysts are backing an August cut.

Marcel Thielant from Capital Economics still expects further cuts; "The upshot is that barring a major upside surprise in the June quarter inflation data, we still expect a cut at the Bank’s next meeting in August.

He added; "That said, the risks are now tilted towards less easing than the 100bp of cuts we’re forecasting over the coming twelve months."

According to BDO Economics Partner Anders Magnusson; "The cash rate setting needs to come down to support the growth of Australia’s economy.


He added; "I expect that this hold is a temporary pause and that the RBA will deliver three cuts by the end of 2026, returning to a neutral monetary policy stance.”

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TAGS: Pound Australian Dollar Forecasts