The Reserve Bank of Australia surprised financial markets Tuesday and left interest rates on hold, saying it could afford to take a little more time to assess the economic outlook. The decision came as President Trump reignited his global trade war, renewing his threat to hit partners with punishing tariffs even as he announced a three-week extension to negotiate deals. Meanwhile, new Federal Reserve research warns of the risk of interest rates returning to zero in the years ahead.

The Reserve Bank of Australia's official cash rate remained at 3.85%, despite financial markets pricing in a near-certain cut to 3.60%. The nine-member board voted six in favor the decision, with three against. “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,” the RBA said in a statement.

• U.S.’s Biggest Asian Allies Ready Last-Ditch Trade Appeal to Trump
• Trump Shares More Letters Declaring Tariff Rates for Countries
• Trump Announces 25% Tariffs on Goods From Japan and South Korea
• Trump’s Letter to Japan, Annotated
• Where Things Stand With Trump’s Tariffs

While resilient Korean exports and the new government's fiscal stimulus are easing growth concerns, a hotter-than-expected housing market in Seoul and rising household debt will likely have the BOK pause. The country is still facing uncertainties over U.S. tariffs, exports and the pace of growth. "Given these uncertainties, the [BOK] Board is likely to want to take a wait-and-see stance," HSBC economist Jin Choi says. — Kwanwoo Jun

Malaysia's central bank could be about to make its first rate cut since May 2023, a Wall Street Journal poll suggests. Six out of the nine economists surveyed expect Bank Negara to lower its benchmark overnight policy rate by 25 basis points to 2.75% this week. Three predict a hold. A rate cut could be a preemptive step to support the economy amid domestic policy shifts and rising external risks, HSBC economists say in a note. With inflation low and the ringgit strengthening, conditions offer a timely window to act, they add. The rate decision is due Wednesday. — Yingxian Wong

6 a.m.: NFIB Index of Small Business Optimism
9 a.m.: Johnson Redbook Retail Sales Index
3 p.m.: Consumer Credit

10 a.m.: Monthly Wholesale Trade
2 p.m.: Federal Open Market Committee meeting minutes and economic forecast

New research from the Federal Reserve Banks of New York and San Francisco finds there is nearly a one-in-10 chance that interest rates will return to zero over the next seven years. The analysis, published Monday, uses pricing from interest-rate derivatives tied to the Secured Overnight Financing Rate, or SOFR, to estimate how markets are thinking about the future path for rates. It shows that both lower expected rates and greater uncertainty increase the odds of eventually running out of room to cut. The risk of hitting zero is low over the next two years, at roughly 1%. But it rises steadily over longer horizons, reaching 9% by 2032. That level is similar to what markets were pricing in back in 2018, when interest rates were climbing, but longer-term uncertainty about the economy’s trajectory remained high. — Barron's

Everything wasn't encouraging in June's jobs report released last week, First Eagle's Idanna Appio says. Job creation overall was higher than expected, but it was concentrated in state and local governments. "Higher quality jobs don't seem to be readily available," Appio says. However, she thinks the Fed has reasons to keep rates unchanged this month, as policymakers watch for signs of tariff impact on prices. "It is still way too early to conclude the tariffs won't have much of an impact on inflation," she says. "That shock is still coming." — Paulo Trevisani

• Germany’s exports fell for a second straight month in May in response to higher U.S. tariffs as Europe’s largest economy looks set for another year of little or no growth.
• Eurozone retail sales data for May offer a reality check, ING economist Bert Colijn says. The 0.7% decline on month comes after stronger sales data at the start of 2025, which hinted that better wage growth was translating into a sales uptick, he says in a note. (Dow Jones Newswires)

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.