Inflation figures due on July 28 are crucial to the interest rate outlook, the minutes of the latest monetary policy meeting of the Reserve Bank of Australia show.
The minutes were released this morning.
But the minutes of the RBA board's July 6 meeting, which ended with the cash rate steady at 4.5 per cent, also confirm uncertainty surrounding the faltering European economy influenced the decision to sit pat this month and could do so again.
The minutes said the earlier decisions to lift the cash rate from 3.0 to 4.5 per cent with six moves beginning in October and ending in May, "afforded flexibility to maintain steady settings in the face of international uncertainty" in July.
The minutes also appeared to confirm the June quarter consumer price index figures next week could be the trigger for another move higher for the cash rate, although the rolling crisis in Europe could be a countervailing force.
"Members noted that the coming month would see important announcements about the health of the European banking system, which had the potential to have a significant impact on financial markets and global confidence.
"There would also be an updated reading on domestic prices," the minutes recorded.
The RBA reiterated its expectation that underlying inflation would moderate further, although it was expected to remain in the upper half of the two to three per cent target range "over the period ahead".
The RBA also noted strength in the labour market, saying hiring had been "strong", employment had risen by two and half per cent over the year, and surveys suggested "further solid gains in employment in coming months".
The Australian Bureau of Statistics will issue revised employment data, which may scale down the apparent growth in employment, but the revisions will be posted after the RBA's August 3 meeting.
The upshot of the minutes is that the RBA could well raise the cash rate next month, but would need to be convinced the European situation is stable and that inflation is deviating - and not just marginally - from the expected path .
"The important question for the Board at its next meeting would be whether the new information materially changed the medium-term outlook for inflation", the minutes said.
AAP