06:35 AM EDT, 07/05/2024 (MT Newswires) -- There was no 'smoking gun' in the minutes of the June Reserve Bank of Australia (RBA) Board meeting to suggest a rate hike in August is its base case, noted ANZ Bank.

The bank continues to expect the cash rate to be on hold at 4.35% until the first 25bps cut in February 2025 but acknowledges there is a risk that the next move is a hike. The Board appears to be data-dependent and waiting for the updated RBA staff forecasts.

These will be prepared ahead of the next Board meeting and published in the August Statement on Monetary Policy (SMP), pointed out ANZ. The August SMP typically extends the forecast horizon out another two quarters, which could buy the Board until the end of 2026 to see inflation back around 2.5%.

An expected return of inflation to target (which the bank judges to be around 2.5% in this context) was one factor that underpinned the decision to leave the cash rate unchanged in June. The minutes stated that: "the case to hold the cash rate steady at this meeting was based on the view that the economy was still broadly tracking on a path consistent with returning inflation to target in 2026."

Despite the line in the RBA's post-meeting statement that "Recent budget outcomes may also have an impact on demand," the minutes were more ambiguous, noting that "staff would incorporate an assessment of the impact of the budgets on the outlook for output and inflation in the August forecasting round." The minutes noted - as we have observed - that "employment growth had been supported by growth in industries where public funding was important."

On the data, May retail sales came in stronger than expected, growing 0.6% m/m. It looked like a robust print, but seasonal factors could be at play with end-of-financial-year sales starting earlier. ANZ will be looking at June retail sales (due July 30) to gauge whether there may be a nascent uptrend in this series.

Residential building approvals increased 5.5% m/m in May, following a revised 1.9% m/m increase in April. While both May prints were robust, approvals remain at low levels and the trend in retail still looks soft, especially given population growth and inflation, wrote the bank in a note to clients.

ANZ-Indeed Job Ads is also sending a weak signal, falling 2.2% m/m in June, the fifth consecutive monthly decline.