By Greg Peel

"Domestically, members noted that the March quarter national accounts data implied that the economy had had more momentum since mid 2011 than had previously been indicated".

That, in a nutshell, is why the RBA elected to remain on hold at 3.5% at its July meeting, having already delivered a swift 75 basis points of cuts on top of 50bps late last year. Take Australia's surprise March quarter GDP out of the equation, and the minutes don't exactly encourage a good deal of enthusiasm.

The pace of recovery has slowed in the US, Europe appears to have declined further in the June quarter and recent Australian data suggest the pace of growth has since slowed from that surprising March result. Growth in the non-mining sector remains modest, particularly those industries under pressure from a strong Aussie and/or a weak housing market.

On a positive note, the pace of China's slowdown is not as rapid as has been feared, European leaders have taken some positive steps, and Australian inflationary pressures remain contained.

While surprised by the March GDP result, the board members were left scratching their heads given some partial elements of the data composition did not seem to add up to what the end result suggested.

All a bit confusing, as if the current state of global affairs were not confusing and uncertain enough.

Yet probably enough to suggest a little bit more wait and see, a bit more data watching, would be the way to go for the time being:

"Members continued to view it as appropriate for interest rates to be a little below average given evidence of slower global growth and the low rate of inflation in Australia. But with a material easing in monetary policy having occurred over the preceding six months or so, and with recent signs that the domestic economy had a little more momentum than had earlier been indicated, members saw no need for any further adjustment to the cash rate at this meeting."

By August we'll have the June quarter CPI result and other data streams, but not yet the June quarter GDP result. Economists now seem split on whether the RBA is set to go again in August. There were no real clues in these minutes.

Read the full minutes here.


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