The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 4.35% in June, judging monetary policy to be somewhat restrictive while warning that inflation remains above target, and further rate increases could be needed if price pressures persist, according to the minutes of the monetary policy committee's June meeting released on Tuesday.

The members noted that global financial conditions had eased since the previous meeting, as progress toward resolving the Middle East conflict lowered oil prices and reduced expectations of further monetary tightening, although uncertainty over inflation and energy markets persisted.

They observed that inflation continues to remain well above the target, with underlying inflation projected to increase in the June quarter even as headline inflation eases because of lower fuel and travel costs.

Members indicated that cost pressures remain widespread, weak productivity continues to drive elevated unit labor costs, and inflation is expected to take about two more years to return sustainably to the target range.

RBA stated that although oil prices have fallen from recent highs, they remain above pre-conflict levels, while ongoing energy supply disruptions continue to pose upside risks to inflation and downside risks to growth, prompting several advanced economy central banks to maintain tighter monetary policy.

The minutes revealed that domestic economic activity eased broadly as expected, with annual gross domestic product growth of 2.5% in the March quarter supported by strong business investment, while household consumption and housing conditions weakened and the labor market remained broadly resilient despite mixed signals.

The board said the outlook is mainly threatened by persistent inflation, driven by global energy markets and weak domestic productivity, and reaffirmed that it will remain data dependent and is prepared to raise the cash rate further if needed to meet its inflation and employment goals.