By a six to three majority (the first time such voting information has been published), the Board voted to keep rates on hold.
It judged it could wait for "a little more information" to confirm inflation is still on track to return to 2.5% per year sustainably.
This is perhaps the biggest cash rate decision shock in years, with economists from all of the big four banks as well as 97% of traders expecting a second successive 0.25% cut.
In the lead up to Tuesday's monetary policy meeting, the general consensus was that the monthly CPI inflation numbers for May would be sufficient to justify another rate cut, but the Board held true to its long stated commitment to a "cautious" loosening cycle.
The August meeting will take place after the quarterly price index, considered more comprehensive, is published for March to June, likely the most important extra information referenced in the accompanying statement.
"While recent monthly CPI Indicator data suggest that June quarter inflation is likely to be broadly in line with the forecast, they were, at the margin, slightly stronger than expected," read the statement.
"With the cash rate 50 basis points lower than five months ago and wider economic conditions evolving broadly as expected, the Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis."
Biggest RBA shock in recent memory?
Among the economic commentariat, many will be reeling in the aftermath of a decision that seemed a foregone conclusion.
The RBA has been known to deliver a decision at odds with market expectations, but rarely in the face of such overwhelming confidence in one direction.
Luci Ellis, Chief Economist at Westpac and ex-Assistant RBA Governor, changed her official prediction from an August cut to a July one because she believed the Board would "validate" market pricing.
"What we are about to see is an RBA that was planning to cut rates soon anyway deciding it may as well get on with it," she said when justifying Westpac's shift to predicting a July cut."
On 2 July, less than a week prior to Tuesday's decision, the RBA ASX rate tracker estimated the probability of a rate cut was 100% based on market expectations, relatively rare in the lead up to any monetary policy meeting let alone one that ended in a hold.
When can mortgage holders expect further relief?
Attention now inevitably shifts to the next RBA meeting, just five weeks away on 12 August.
This monetary policy decision will be informed by the quarterly inflation numbers, as well as the unemployment figures for June.
The most recent RBA forecasts for June put the unemployment rate at 4.2% (which will require a material increase from May) and trimmed mean inflation at 2.6%, just above the midpoint of the target range.
Data in line with these predictions would make an August rate cut appear inevitable, although many would have said the same about July.
Picture from Leo_Visions on Unsplash
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