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In its announcement that it had decided to leave its cash rate unchanged at 3.5 per cent today the Reserve bank reached exactly the same conclusion as it did when it left rates on hold a month ago.

Interest rates are already "a little below their medium-term averages", it says, as it did on August 7. Inflation is not threatening to get out of control, Australia's economic growth is close to trend, and "with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate," it says, perfectly replicating its concluding statement four weeks ago.

Subtle changes in the latest communiqu suggest, however, that the the Reserve's bias towards another rate cut has become more pronounced.

It said on August 7 that current assessments were that global gross domestic product would grow "at no more than average pace in 2012." It says the same thing in today's announcement, but adds a new comment that "risks to the outlook (are) still on the downside."

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It notes again that commodity prices have declined, but also refers tacitly to the more recent startling drop in the price of iron ore, Australia's most important export earner, saying "some commodity prices of importance to Australia have fallen sharply in recent weeks."

China, Europe weakness

Its commentary on China's growth is also more cautious. A month ago, it said that China's growth had "moderated to a more sustainable pace, but does not appear to be slowing further." Today it says "Growth in China remained reasonably robust in the first half of this year, albeit well below the exceptional pace seen in recent years. Some recent indicators have been weaker, which has added to uncertainty about near-term growth"

The central bank board repeats its view of a month ago that financial markets have reacted positively to signs of progress in addressing Europe's sovereign debt problems - a reference mainly to the plan that European Central Bank President Mario Draghi is working on, to forge an ECB-European Union alliance to buy European sovereign debt, in Spain, notably, driving borrowing costs down in the process.

Now however it also says that "expectations for further progress are high" - a reference to the fact that the markets have already rallied, and that Draghi must now deliver, beginning on Thursday night when the ECB meets to draw up its plan in detail, even as interests including Germany's Bundesbank lobby against ECB intervention.

Read more:
Subtle word shifts reveal RBA readiness to act