The Reserve Bank board pondered another lift in interest rates before eventually plunking to pause, the bank boss has revealed.

RBA Governor Michele Bullock said “complex” economic issues led to discussion of a raise from 4.35 per cent, where the official cash rate has been since November last year.

“The board did discuss the case for increasing interest rates at this meeting,” she said at the post-meeting media conference on Tuesday.

“In the end, it decided that its current strategy of staying the course and trying to bring inflation back down by bringing supply back to demand was the right way to go.”

The case for a cut in rates was “not considered”.

Bullock warned that a slowing rate of reduction in inflation, as well as slightly stronger growth in consumption and a small drop in savings, did put the possibility of another hike on the board’s radar.

Despite that, Tuesday’s decision to remain on hold for the fifth RBA board meeting in a row had been widely anticipated by economists.

At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent. https://t.co/5dtnTIw9im

— Reserve Bank of Australia (@RBAInfo) June 18, 2024

The board’s official post-meeting statement featured similar language to previous meetings, with members still “not ruling anything in or out” and choosing to stay responsive to incoming data.

However, some commentators noticed an increase in the use of the word “uncertainty”. Opposition treasury spokesman Angus Taylor said it featured eight times in Tuesday’s statement.

“The only thing that is certain is that this government’s budget absolutely failed to deal with those inflationary and interest rate pressures that Australians are facing,” he said.

“We are facing a dangerous cocktail right now of low growth. We’ve had five quarters where (gross domestic product) per person hasn’t grown, a household recession, which is bearing down on every Australian family, and at the same time persistent inflation.”

Tuesday’s call by the RBA followed two days of meetings where board members dissected the latest data as well as the economic significance of state and federal budgets and the workplace umpire’s decision to lift the minimum wage by 3.75 per cent from July 1.

Bullock said wages growth in the March quarter was weaker than expected, and the board considered it had likely passed its peak for the current cycle.

“But growth of unit labour costs was still a bit high,” she said.

“Employment [is] still growing. It’s just growing a bit more slowly than it was a year or so ago. Now, this is important for the other part of our mandate because people having jobs is critical to them being able to meet the challenges of the higher cost of living.”

The RBA started hiking interest rates in 2022 as inflation moved above its 2 to 3 per cent target range and kept climbing.

Since the aggressive hikes cycle began, the economy has slowed significantly, easing demand for goods and services and taking pressure off prices.

Inflation has fallen from its peak of 7.8 per cent in late 2022, but the 3.6 per cent rise in the year to March remains outside the target band.

With the economy sluggish and price pressures easing – albeit not as quickly as hoped – most economists believe the next move will be a cut in interest rates.

Bullock said rates were the central bank’s only tool – and a blunt one.

“Interest rates are part of what’s hurting [people], but inflation is really hurting them,” she said.

“Businesses are feeling it because all of their input costs are going up and they can’t [pass that on] … that’s obviously hurting them. Consumers are feeling it when they go to the supermarkets.

“I can’t tell them when we will bring interest rates down. But I can say that my laser focus and the board’s laser focus is on bringing inflation down, and that will help them.”

Moody’s Analytics pointed to a “two-thirds probability of a cut in December” following Tuesday’s update.

“With all the uncertainty surrounding the outlook for inflation (however you measure it), the RBA will stay put for a little longer,” economist Harry Murphy Cruise said.

“We’re still confident the next move will be down, but we’re less confident the cut will come before Christmas. Still, we put a two-thirds probability of a cut in December. At that time, headline inflation should be around 3.3 per cent and returning to the RBA’s 2 per cent to 3 per cent target band by the middle of 2025.”

RSM Australia economist Devika Shivadekar the tone of the latest statement “was leaning hawkish” and concerns about inflation were well-founded. She said inflation was a lagging indicator – and this year’s figures were due to RBA actions last year and in early 2024.

“Therefore, so long as the RBA stays on a cautious hold, we can expect to see the results materialise in the coming quarters as the rate hikes continue to pass through,” she said.

-with AAP