Inflation data key to RBA’s next move
The Reserve Bank of Australia will wait for key inflation data before it gives a ruling on its benchmark interest rate next month, according to the minutes of the central bank's July board meeting.
The RBA maintained the cash rate at 4.5 per cent on July 6 because the world economy was growing at around trend pace, even with a significant retarding of some economies and concerns over the European financial crisis.
The central bank said official inflation data to be released on July 28 would decide the course of its August 3 meeting.
"Headline inflation was expected to rise, owing to the effects of some tax increases, with the year end increase in the CPI (consumer price index) rising above three per cent," the minutes said.
"The important question for the board at the next meeting would be whether the new information materially changed the medium term outlook for inflation.
"Pending this information, the board judged it appropriate to hold the cash rate unchanged."
The central bank, however, predicts inflation pressures to have eased slightly, with the underlying measure of inflation to be lower than 3 per cent for the first time in three years.
The RBA's stated mission is to limit inflation within 2 to 3 per cent over the medium term.
The minutes also reflected the central bank's concern over the European debt crisis, noting that board members were anticipating the results of European bank "stress-tests" due early July.
"Members observed that, in order to settle markets, it was critical that the stress tests be regarded as credible and that plans in place to deal with any capital shortfall identified in the stress tests."