The Reserve Bank of Australia (RBA) held its cash rate at 4.50% today, as expected. The external risks have increased but the RBA is still upbeat about the local outlook. GDP growth is forecast to stay at trend or better over the next 12 months while inflation will probably stay close to the top of the 2-3% target range, with the risks skewed to the upside. The chance of an extended pause is higher now than a few months ago, but we still expect another 25bp hike in August.