Reserve Bank of Australia Statement comparison — 20 May 2025 vs 8 July 2025

This Reserve Bank of Australia statement comparison covers 20 May 2025 and 8 July 2025. Overall, the newer document was more hawkish. The central bank shifted from cutting rates to holding steady, with inflation concerns becoming more prominent and labour market tightness easing. This suggests a prolonged pause unless inflation declines further or growth deteriorates significantly.

What changed

More hawkish. The central bank shifted from cutting rates to holding steady, with inflation concerns becoming more prominent and labour market tightness easing. This suggests a prolonged pause unless inflation declines further or growth deteriorates significantly.

Inflation — More hawkish. Prior passage highlighted inflation below target supporting cuts, but current passage warns of upside risk to underlying inflation, indicating a hawkish tilt.
Labour Market — More dovish. Prior described labour market as tight with high unit labour costs, while current merely notes low unemployment, a dovish softening.
Rate Path — More hawkish. Prior delivered a cut, while current holds rates steady and emphasizes a cautious gradual approach, signalling a hawkish pause.
Balance Sheet — Little changed. No explicit balance sheet policy mentioned in either document.

Key wording

20 May 2025

At its meeting today, the Board decided to lower the cash rate target by 25 basis points to 3.85 per cent.
rate path: Rate cut signals monetary easing.

At 2.9 per cent, annual trimmed mean inflation was below 3 per cent for the first time since 2021
inflation: Underlying inflation now within target, supporting rate cut.

a range of indicators suggest that labour market conditions remain tight.
labour market: Tight labour market adds inflationary pressure, limiting scope for further cuts.

growth in unit labour costs remains high.
labour market: High unit labour costs signal persistent cost pressures, complicating inflation outlook.

The Board judged that the risks to inflation have become more balanced. Inflation is in the target band and upside risks appear to have diminished
rate path: Balanced risks justify current easing but do not signal urgency for more.

The Board considered a severe downside scenario and noted that monetary policy is well placed to respond decisively to international developments
rate path: Readiness to ease further if downside risks materialize.

8 July 2025

today the Board decided to leave the cash rate on hold at 3.85 per cent.
rate path: Actual policy decision: no change, contrary to market expectations for a cut.

But quarterly trimmed mean inflation has only been in our 2 to 3 per cent target range for one quarter at 2.9 per cent in March.
inflation: Inflation within target but only for one quarter, requires confirmation of sustainability.

unemployment remains low at 4.1 per cent.
labour market: Tight labour market supports cautious easing.

The likelihood of a severe downside scenario associated with a trade war which we set out in our May Statement, that likelihood has abated. But this is a very fluid situation
rate path: Downside risk from trade war reduced but not eliminated; uncertainty remains.

we’ve already cut the cash rate by 50 basis points since February this year, the effects of which are still to flow through to the economy.
rate path: Acknowledges past cuts and that their impact is still unfolding, suggesting scope for more easing later.

the Board continues to judge that it is appropriate to maintain a cautious, gradual approach to easing monetary policy. We remain alert to adverse outcomes that could cause a sharp deterioration in the outlook and monetary policy is well placed to respond decisively if necessary.
rate path: Emphasis on caution and gradualism, but readiness to act decisively if needed.

Official documents

Background reading

20 May 2025 statement · 8 July 2025 statement · Earlier meeting · Later meeting · Next comparison · Methodology