The latest official statement on monetary policy shows the central bank is worried about rising inflation but alert to increasing dangers from the global economy.

The bottom line from the quarterly statement from the Reserve Bank of Australia (RBA) on Friday is that economic growth is still expected to pick up to a pace faster than average and inflation is expected to rise above the two to three per cent target range by the end of 2013,

The timing of the pickup in growth has shifted out a bit, thanks to the mining industry’s delayed recovery from floods in Queensland and an unexpected reluctance of households to spend, with above average growth now slated for mid-2012 rather than 2011.

And the RBA’s underlying measures of inflation are expected to get above three per cent at the end of this year, before reverting to the previously forecast three per cent.

Underlying inflation, excluding the introduction of the carbon price, is then forecast to edge up at the end of 2013, as formerly expected.

But, by and large, the RBA’s expectation for where the economy will be a year or two from now is broadly unchanged from three months ago.

That’s important, because that is the time frame over which monetary policy has its effect.

Accordingly, the presumption still has to be that, with the labour market already nearing what most economists would consider to be full employment, the RBA is still anticipating the need to raise interest rates at some stage to keep inflation on target.

It acknowledged as much in the statement.

“In view of the medium term outlook for inflation, at its recent meeting the Board considered whether it was appropriate to tighten monetary policy further,” the RBA said.

But the risks to the outlook are not symmetrical balanced around the RBA’s forecasts.

“While these forecasts represent the bank’s central scenario, at the global level the risks to economic activity are weighted to the downside,” the RBA said in the statement,

Those risks centre on the well-known sovereign debt problems in Europe and the difficulties the US Congress is having in charting a rational path for fiscal policy.

Domestic risks were more evenly balanced, the RBA said, with households plausibly becoming either more or less cautious than expected, and uncertainties surrounding the outlook for wages growth, productivity growth and the effect of the exchange rate on prices.

But the global uncertainties are clearly dominant in the RBA’s thinking.

Combined with the delayed pickup in the local economy, they have given the central bank breathing space before it has to act to corral inflation.

So, while the “central scenario” implies more risk of interest rate rises than of cuts, the RBA is clearly on the fence at the moment.

And it looks like staying there for a while.

The warning in the May monetary policy statement that “further tightening of monetary policy is likely to be required at some point” to keep inflation on target, repeated on three subsequent occasions by the RBA, conspicuously does not appear in the August statement.