RBA cuts rates by 25bps to 3.60% after July pause surprises markets

The Reserve Bank of Australia delivered a 25 basis point rate cut in its August monetary policy decision, lowering the cash rate to 3.60% following July's unexpected pause. The decision aligned with market expectations after the central bank surprised traders by holding rates steady in the previous meeting. The RBA cited moderating inflation pressures and concerns about global economic growth as key factors behind the easing decision. Governor's statement highlighted that while the labor market remains relatively tight, forward indicators suggest some softening ahead. The rate cut immediately impacted currency markets, with AUD/USD dropping 40 pips to test the 0.6500 support level. Market pricing now suggests a 60% probability of another 25bp cut by year-end, depending on incoming economic data. The decision reinforces the RBA's data-dependent approach while acknowledging the need to support economic growth amid external headwinds.