Australia's inflation rate dropped to 2.1% year-over-year in Q2 2025, its lowest since March 2021, beating economists' expectations. While this fueled speculation of further interest rate cuts by the Reserve Bank of Australia (RBA), the RBA kept rates steady at 3.85%, citing stronger-than-expected economic indicators and a tight labor market. The RBA expects inflation to rise again later in the year. Australia's GDP growth also underperformed expectations in Q1 2025.

Prepared by Christopher Adams and reviewed by editorial team.