The central bank says time is on its side and it will wait for more economic data before moving on interest rates.

With coal exports still to recover from the summer floods, employment growth easing and Europe’s sovereign debt crisis looking more significant, the Reserve Bank of Australia (RBA) says it’s happy to keep on hold.

The official cash rate has been at 4.75 per cent since November 2010.

“The extent to which these forces would strain the economy’s productive capacity over time would be a key determinant of inflation,” the RBA board said in the minutes of its July 5 monetary policy meeting, released on Tuesday.

“Members noted, however, that the flow of recent information suggested both that there was more time to assess the likely strength of inflationary pressures in Australia and that it would be prudent to use that time.”

The RBA said consumer price index (CPI) data, a key measure of inflation, would help determine its views about future interest rates.

The Australian Bureau of Statistics releases June quarter CPI on July 27.

Arab Bank Australia treasury dealer David Scutt said the CPI could actually trigger interest rate cuts.

“Whilst most will interpret (the minutes) to mean more tightening should CPI print hotter-than-expected, the admission also opens the door to easing should inflation come in below expectations,” Mr Scutt said.

The RBA said the recovery of coal exports from the Queensland floods was taking significantly longer than expected and a return to full capacity could be delayed to early 2012.

Disruptions in production locally and global uncertainty may hit domestic growth this year, the RBA says.

“The delays in the recovery of coal production and supply-chain disruptions resulting from the Japanese earthquakes and tsunami also meant that GDP (gross domestic product) growth through 2011 was unlikely to be as strong as earlier forecast, with some of the recovery being pushed into the early part of 2012.”

The RBA noted downside risks associated with a possible adverse European financial shock looked more significant than was the case a few months ago.

However, Australian credit markets were still unaffected, it said.

“Issuance by Australian banks, both secured and unsecured, had remained solid and pricing had not materially changed.”

The pace of employment growth had for some months been more moderate than in 2010, and the overall labour market was not tightening significantly, the minutes said.

Economists at Nomura said the minutes showed the RBA had shifted to a neutral policy stance from a tightening bias in June.

“The change is made clearest in the paragraphs concerning considerations for monetary policy, by the removal of the reference that further tightening `would be necessary at some point’,” the economists said in a statement.

Nomura is forecasting a 25 basis rate rise in November.

Mizuho treasurer Joe Ivanovski said the local fixed income market had barely reacted to the minutes and had already priced in later rate hikes late last week.

On Friday, Westpac reversed its outlook for official interest rates, saying it now expects a series of rate cuts, starting with 25 basis points in December and continuing throughout 2012.

Shortly after the news, domestic bond prices rose and the Australian dollar dropped more than one US cent.