RBA Governor Bullock Hints at August Cut After Surprise Hold; AUD/USD Jumps

RBA Governor Michele Bullock Toes Cautious Policy Line

RBA Governor Michele Bullock held a test press conference after the Bank unexpectedly held interest rates at 3.85%. Falling bets on multiple rate cuts in H2 2025 drove the AUD/USD pair higher, exposing the pair to heightened volatility during the press conference. However, the pair dipped during the press conference as RBA Governor Bullock hinted at a possible August rate cut.

Key Takeaways from the media Q&A:

• If the quarterly CPI shows inflation falling toward the middle of the band over time, the RBA can cut interest rates in the next meeting.
• We have the opportunity to cut rates cautiously and gradually as the RBA didn’t hike rates to levels seen elsewhere.
• The RBA could cut rates more aggressively if needed.
• On tariffs, there will be an impact on us, partly driving deflationary forecasts, but the impact on Australia will likely be less severe than on the US. Trade terms with China remain crucial.
• The Reserve Bank can’t go out and warn markets against rate cut bets before the interest rate decision.
• Differences among board members relate to the timing of rate cuts, not the direction.
• Households should be banking on us to ensure inflation doesn’t get out of hand again.
• We’ve still got a low unemployment rate relative to history.
• Provided we are still on top of inflation and we are getting confirmation, then an easing cycle is coming.
• House building costs and durable goods in the monthly CPI numbers were higher than the RBA thought, contributing to the rate cut delay.
• If there is an external shock, the RBA has room to react.
• We are not keeping interest rates high just in case. We are reacting to the data.
• If China bolsters its economy with fiscal stimulus, that could cushion the impact of tariffs on Australia’s economy.

RBA Surprises Markets, Fueling Aussie Dollar Demand

Earlier on Tuesday, the RBA caught markets by surprise, leaving the cash rate at 3.85%. Economists expected a 25-basis point rate cut. The RBA Rate Statement set the stage for a testy press conference for RBA Governor Michele Bullock.

Expert Views on the RBA Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on the RBA’s interest rate decision, stating:

“RBA surprised on hold waiting for a more info inflation is on track for 2.5%. With the RBA seeing inflation risks more balanced, remaining “cautious” & noting heightened uncertainty & the cash rate > neutral we still it falling to 2.85% but more slowly with next cut in Aug.”

AUD/USD Reacts to Governor Michele Bullock’s Q&A Session

The AUD/USD pair soared in reaction to the RBA’s interest rate decision, climbing from $0.65120 to a pre-press conference high of 0.65567.

The AUD/USD gave up some gains during the RBA press conference, falling from $0.65427 to a low of $0.65263 before steadying. The market reaction reflected hopes of an August rate cut but a potentially less dovish RBA policy stance, narrowing the US-Australia interest rate differential in favor of the Aussie dollar.

On Tuesday, July 8, the AUD/USD was up 0.66% to $0.65333.

For a comprehensive analysis of AUD/USD trends and trade data insights, visit our detailed reports here.