The expiry of low fixed-rate loans continues to haunt the Reserve Bank and featured prominently in its decision to keep interest rates on hold.

The central bank’s board also feared a sharper than expected pullback in economic growth.

Minutes from the July cash rate decision, released on Tuesday, confirm the RBA again weighed up the case for another 25 basis point hike as well as pausing rates.

It ultimately landed on a second pause in the hiking cycle, leaving the cash rate unchanged at 4.1 per cent.

The minutes kept the reference to possible further tightening, however, as included in the governor’s post-meeting statement.

“Members agreed that some further tightening of monetary policy may be required to bring inflation back to target within a reasonable timeframe, but that this depended on how the economy and inflation evolve,” the minutes said.

They emphasised the lag time between interest rate movements and their impact on borrowers and other sections of the economy as a key reason for keeping interest rates steady.

Importantly, mortgage interest payments had reached a “historical peak” of 9.4 per cent of household disposable income in May, the minutes said. They will continue to rise as more fixed rate loans expired.

Similarly, board members noted the labour market typically responded to rate hikes with a lag, and the resilience in the jobs market would eventually ease.

The board also discussed the possibility of the economy slowing by more than expected, with “considerable uncertainty” still hanging over spending habits

For example, higher interest rates on deposit accounts could weigh on spending by encouraging saving.

“If that were to occur, the demand for labour would slow and the unemployment rate would be likely to rise beyond the rate required to ensure inflation returns to target in a reasonable timeframe,” the board warned.

In support of the case of more hikes, the board members noted that inflation was still “very high”, especially services and rents inflation.

“The case to increase the cash rate further was centred on the observations that inflation was forecast to remain above target for an extended period and there was a risk that this timeframe would be extended without further monetary policy tightening,” the minutes said.

Energy inflation was also flagged as a concern, with the board concerned the “wider effects” of rising electricity prices had not been fully captured.

Board members also referred to the endurance of the labour market and persistent inflation in other advanced economies.

The meeting was held before US inflation data came in softer than expected.

– AAP