Australian mortgage holders have been gifted an early Christmas present as the Reserve Bank chooses to leave interest rates untouched.
The board has decided to leave the cash rate at 4.35 per cent at the December meeting in a move most forecasters saw coming.
The pause follows 425 basis points of increases to the cash rate since May last year that has pushed repayments up steeply for variable-rate mortgage holders.
Higher interest rates are aimed at bringing down inflation, which has been moderating but remains well below the two-three per cent target range.
The December call followed a month of softer data, including a slowdown in the monthly inflation gauge to 4.9 per cent in October, from 5.6 per cent in September.
A weaker retail sales report suggests consumers are cautious and cracks are starting to appear in the labour market.
In a post-meeting statement, RBA governor Michele Bullock again left the door open to more tightening in phrasing recycled from the month before.
"Whether further tightening of monetary policy is required... will depend upon the data and the evolving assessment of risks," Ms Bullock said.
Upcoming decisions remain data dependent, with the RBA to keep a close eye on "developments in the global economy, trends in domestic demand and the outlook for inflation and the labour market".
KPMG chief economist Brendan Rynne said the central bank appeared ready to react to new economic data, particularly the evolution of the home-grown component of inflation.
The central bank governor has repeatedly warned inflation now has a domestic element to it - as well as supply side drivers - which means interest rates are effective at bringing it down.
Dr Rynne said more rate rises could not be ruled out but KPMG's central case was more tightening was probably unnecessary.
"Price momentum is heading in the right direction," he said.
Deloitte Access Economics partner Stephen Smith said demand-side price pressures were "part of the story" but the supply side remained the key source of inflation.
He said the RBA's analysis from a few months earlier concluded at least half of the excessive inflation plaguing Australia's economy was because of supply side factors - international and local.
"Domestic supply side constraints in housing and energy are key," the economist wrote in a note.
"Higher interest rates will do nothing to ease these supply side constraints, just as they will do nothing to stem the pace of population growth - the major driver of demand (and supply of skills) in the Australian economy."
Mr Smith said the blunt tool of monetary policy was the "wrong weapon" against these price pressures.
"In fact, higher interest rates will make it more difficult for Australia to boost housing supply and ease the cost of living crisis facing younger Australians who are renting or have mortgages."
Treasurer Jim Chalmers said the December cash rate decision would be met with "sighs of relief right around Australia".
"The last thing that people needed at Christmas time was another rate rise," Dr Chalmers said on Tuesday.
He highlighted "encouraging progress" on inflation.
Shadow treasurer Angus Taylor said Australia was at the "back of the pack" in the global fight against high inflation.
"We are really struggling to deal with this," he told ABC TV on Tuesday.
Monetary policy meetings are set to resume in February.
