Australia’s central bank has not dismissed the possibility of further interest rate hikes, as its latest meeting minutes indicate that inflation in the country is declining at a slower rate than forecast.

The Reserve Bank of Australia’s (RBA) board minutes released on Tuesday revealed the bank seriously contemplated a rate hike at the meeting earlier in May, but decided to hold rates steady due to “the higher-than-usual level of uncertainty” regarding the outlook.

Although it recognised “risks around inflation had risen,” consumer spending remained markedly subdued, with the RBA reporting households were “maintaining a higher rate of saving than had been expected.”

Consequently, the board said Australia’s economy was still finely “balanced,” considering the potential for a recovery in spending if real disposable income increases and job market conditions stay robust, Sky News Australia reports.

“Members judged that the case to leave the cash rate unchanged at this meeting was the stronger one,” the minutes stated.

“They agreed that the flow of information since the previous meeting had increased the risks of inflation staying above target for longer. However, members considered that the staff forecasts presented a credible path back to the inflation target, with the risks surrounding the forecasts judged to be balanced.

“Given this, and the higher-than-usual level of uncertainty about the economic outlook, members judged that it remained reasonable to look through short-term variation in inflation to avoid excessive fine-tuning.”

Although most economists did not forecast a rate hike at the bank's last meeting, many voiced concerns that the Federal Budget, presented by Treasurer Jim Chalmers last week, could further complicate the central bank’s outlook.

Despite Mr. Chalmers' repeated assurances that the government's measures would reduce inflation, experts have warned that “second-round impacts” could increase aggregate demand and result in higher interest rates for most of the coming year.

The RBA added it would be “difficult either to rule in or rule out future changes in the cash rate target,” while uncertainty remains in the economy.