Consumer price index, Europe the keys to the Reserve Bank's next interest rate move

Another rate rise could be a couple of months away, as the RBA waits for the CPI and Europe to move first.

Reserve Bank of Australia governor Glenn Stevens kept interest rates on hold at 4.5 per cent in June, after three months of consecutive increases / File

HOMEOWNERS shouldn't be panicking about another interest rate rise just yet.

It could be a couple of months away.

Or, looking at the pricing on money markets, it could even be 12 months off, but don't get your hopes up.

The profile of the market could quickly change when the next official inflation readings are released on July 28.

The minutes of the Reserve Bank's (RBA) June board meeting - where it left the cash rate unchanged at 4.5 per cent after three months of consecutive increases - were released this week.

It said borrowers were now paying around the average levels of the past decade after the six rate increases since October last year.

"Members judged that these previous actions afforded policy the flexibility to await information on how the recent market uncertainty might affect the global economy, as well as news about the outlook for inflation," it said.

"For the near term, therefore, members judged that it was appropriate to leave the cash rate unchanged."

The minutes went on to say that board members noted that the consumer price index (CPI) for the June quarter would be released in late July and would "provide information on the extent of inflationary pressures in the economy".

That may be stating the obvious, but the fact that it's mentioned means that it will be critical to the board's decision making.

But it does also mean borrowers will get at least another month of relief from rising mortgage costs with the next board meeting on July 6 and well before the CPI data.

Nomura Australia chief economist Stephen Roberts expects inflation could prove to be "just about tolerable" this time around, and possibly allow the RBA to hold fire on rates until November and after the September quarter CPI that is due to be released in late October.

He forecasts an annual CPI of 3.0 per cent for the June quarter, up a notch from 2.9 per cent previously, and underlying inflation measures to average out at 2.8 to 2.9 per cent - within the RBA's two to three per cent target band.

"But if they get above three, then they will have no choice as inflation won't be coming down any time soon," he said.

He believes the central bank is now at the critical "third phase" in tightening monetary policy, and the one that would have the biggest impact on indebted households, should it need to slow economic activity to dampen inflation pressures.

Phase one, and the three rate increases between October and December last year, removed the excessive rate cuts that had taken the cash rate to an "emergency" low of 3.0 per cent.

Phase two - the three rate rises between March and May - brought effective lending rates to more normal levels.

The RBA's latest inflation forecasts released in May also suggest that once policy enters phase three, rates will remain high for some time with both the CPI and underlying measures seen at three per cent out to the end of 2012, providing little wriggle room from building price pressures.

But there is another side to the RBA's decision making.

That is the ongoing uncertainty hitting financial markets that is being generated from the European debt crisis, which may force the RBA to stay its hand if events turn even uglier.

Highlighting the central bank board's concerns, "Financial Markets" took top billing in the latest minutes, rather than the usual "International Economic Conditions".

In a separate address to financial executives, Deputy RBA Governor Ric Battellino said that events in Europe were "quite worrying".

He said that if governments got into trouble they had to look to other governments or the International Monetary Fund to bail them out.

"The bigger you are, the less capacity there is for somebody to bail you out," Mr Battellino said in answer to a question from the audience.

"The developments in government debt are, I think, a worry because it's not clear to me that they can be solved, certainly any time soon."

In terms of Greece, the epicentre of Europe's problems, and others, the starting point of their finances were "so poor" that even "severe fiscal tightening still leaves them with big budget deficits", he said.

In contrast, Australia's debt position was "very good" and "one of the best in the world", he said adding that there was no debt problem among its Asian trading partners either.

"If we are going to be affected by these (European) issues - and I suspect to some extent we will be - we're in a part of the world which will be least affected by these issues," he said.

Mr Roberts said it was Australia's linkages through global markets as to where potential problems lie, and whether credit markets suffered the same fate as when the global financial crisis was at its worse in late 2008.

"Obviously, the jury is out on that," he said.

It is also how far these debt problems spread across Europe, and beyond "peripheral" countries like Greece, Portugal and Spain.

"More are tipping towards the amber/red light zone as far as the markets are concerned," he said.

So, even if the RBA is forced to take the next step in lifting rates in August because of three per cent-plus inflation, this uncertain global backdrop does suggest that further increases won't necessarily be so rapid as they have been in the past nine months.

Which is a small consolation.