Australia’s central bank held its policy rate at 3.85%, saying it needed more time to assess inflation data.

Economists polled by Reuters had been expecting a cut of 25 basis points to 3.6%.

In its statement Tuesday, the Reserve Bank of Australia said it was waiting for “a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.”

“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,” the central bank added.

Australia’s inflation came in below expectations at 2.1% in May, the lowest since October 2024. In the first quarter, inflation was at 2.4%, staying at a four-year low.

Just after the decision, Australia Treasurer Jim Chalmers said on X that the move by the RBA was “not the result millions of Australians were hoping for or what the market or economists were expecting.”

He added that the country had made “substantial and sustained progress on inflation,” and touted his government’s efforts to relieve the cost of living.

Just after the data release, the S&P/ASX 200 index fell 0.24%, while the Australian dollar strengthened 0.79%.

Australia is currently struggling with a growth slowdown as public spending shrinks and as consumer demand and exports weaken.

The country recorded a 1.3% expansion in the first quarter of the year, missing Reuters poll expectations of 1.5%.

In a note after the decision, Harry Murphy Cruise, head of economic research and global trade at Oxford Economics, said the case for a cut was “strong,” given that inflation is back on target, among other factors.

“While the domestic economy has pockets of strength and unemployment is low, it would be worthwhile to build momentum in the economy ahead of potential tariff turmoil, rather than risk being caught flat-footed if conditions sour,” Cruise added.

He foresees that the next cut will be in August, saying that by then, the RBA’s board would have the quarterly CPI print to confirm if inflation is easing as expected. On top of that, he said new tariffs would be in effect, giving “little reason” to wait.