Interest rates have held for the fourth month in a row in Michele Bullock's first rate setting meeting as Reserve Bank of Australia governor.
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In a widely-tipped move, the central bank board decided to hold the official cash rate at 4.10 per cent on Tuesday, despite a slight rise in inflation.
Ms Bullock said that the current interest rates were "working to establish a more sustainable balance between supply and demand in the economy and will continue to do so".
"In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month," she said in a statement.
"This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook."
Federal Treasurer Jim Chalmers praised the decision, describing it as a "welcome reprieve for people who are already doing it tough enough".
Pradeep Philip, head of Deloitte Access Economics, also said the RBA made the right call in light of slowing economic growth.
"There is clear evidence of a slowing economy - with confidence waning, consumer spending weak, and the retail sector in the doldrums," Mr Philip said.
"Increasing interest rates in this environment would have simply added to the economic risks facing the economy.
"With supply side factors driving inflation, if we want to cool further price increases without tipping the economy over into recession while also addressing challenges like housing prices and climate change, we must prioritise productivity-enhancing macroeconomic reform."
The central bank has raised interest rates twelve times since May 2022 in an effort to fight rising inflation.
Ms Bullock said that while inflation in Australia had passed its peak, "it is still too high and will remain so for some time yet".
"High inflation makes life difficult for everyone and damages the functioning of the economy. It erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality," she said.
"And if high inflation were to become entrenched in people's expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment."
The monthly Consumer Price Index (CPI) indicator saw inflation rise 5.2 per cent in the 12 months to August, up from 4.9 per cent in July.
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But cutting out volatile changes in fuel, fruit and vegetables and holiday travel, annual core inflation for August actually came in at 5.5 per cent, down from the annual rise of 5.8 per cent in July.
Annual inflation still remains well below the peak of 8.4 per cent in December last year.
Ms Bullock said recent data shows inflation will be back within the two to three per cent target range by late 2025.
Shadow treasurer Angus Taylor also welcomed Tuesday's announcement, but blamed the Albanese government for failing to combat inflation, adding that the reserve bank had signalled it was prepared to increase rates again.
"So we've got another two years of sticky, persistent, high inflation on the way and meanwhile we have an economy that has shuddered to a halt," he said.
".... what we need is a government that focuses on these cost of living pressures as their first, second and third priority. They cannot be distracted."
A slim majority of surveyed economists have predicted to Reuters we will see the cash rate rise to 4.35 per cent before the new year.
Even if rates stay firm, around 970,000 borrowers are still set to see mortgage repayments soar as their fixed interest rates expire in the coming months.