RBA: Inflation still holds key to interest rates

The Reserve Bank of Australia will only decide whether or not to raise interest rates at its meeting next month after it receives official inflation data on July 28th, it has been revealed.

Minutes from the central bank’s rate meeting earlier this month show that RBA felt global economic growth has been stable despite fears of another credit crunch in the wake of the European financial crisis.

The RBA opted to keep the cash rate on hold at 4.5 per cent on July 6th and suggested it would not consider moving from this position at the August 3rd meeting unless inflation had changed.

"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," said the minutes.

"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."

Last week, Dun & Bradstreet’s consumer credit survey of 1,205 adults across Australia found that 49 per cent expect a further interest rate rise to put a dent in their household finances.

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