The Reserve Bank of Australia is wary of lowering interest rates too quickly and is cautiously waiting for more data.

1. The Reserve Bank of Australia believes that the decision to keep interest rates unchanged this month, after two previous cuts, is not in line with their cautious and gradual easing policy. The minutes of the July 7th and 8th policy meeting showed that the majority of the nine committee members of the Reserve Bank believed that the current interest rate of 3.85% was still appropriate, but it was difficult to determine how much further it could be lowered before reaching a neutral level. The minutes stated, "Therefore, committee members believe that as policy constraints decrease, cautiously lowering interest rates may be a wise move." 2. Three board members who advocated for a rate cut believed that there was enough evidence to suggest that inflation would continue to return to target levels, and there was no need to wait for further policy easing. The Reserve Bank of Australia surprisingly maintained the interest rate at a meeting in a rare six to three vote, causing market surprise. Most board members preferred to wait for more information, including quarterly price data, to confirm a slowdown in inflation. Prior monthly inflation reports showed a significant drop in the trimmed mean inflation rate to a three and a half year low of 2.4% in May, leading traders to heavily bet on a rate cut. Due to weak public demand, the economy barely grew in the first quarter. 3. The Reserve Bank of Australia acknowledged the market pricing and noted that there have been instances in the past where markets were very confident in the outcome of policy meetings, only for the central bank to take a different action. The report indicated that multiple data indicators were in line with expectations, and even slightly above, suggesting that waiting a bit longer would be beneficial. Despite weak economic growth in the first quarter, the rebound in private demand exceeded expectations, and the labor market did not relax as expected. The report suggested that there may be fluctuations in monthly inflation rates, and factors such as housing indicate that the June quarter inflation rate may be slightly higher than expected. Additionally, despite uncertainty about the future of U.S. trade and other policies, the likelihood of the global economy moving towards the most severe downturn has decreased. Following concerns raised by an unexpectedly weak employment report that cracks were finally appearing in the resilient labor market, the market now implies a 91% chance that the Reserve Bank of Australia will further ease policy at the next meeting on August 12. Futures markets predict interest rates to bottom out around 3.10% early next year.