The Reserve Bank of Australia says it is prepared to remain patient before it lifts interest rates, but it is ending its bond buying program as of February 10.
As widely expected the RBA left the cash rate at a record low 0.1 per cent at Tuesday's monthly board meeting, the first of 2022.
"Ceasing purchases under the bond purchase program does not imply a near-term increase in interest rates," RBA governor Philip Lowe said in a statement after the meeting.
"As the board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the two to three per cent target range."
He said while inflation has picked up, it is too early to conclude that it is sustainably within the target band.
"There are uncertainties about how persistent the pick-up in inflation will be as supply-side problems are resolved," he said.
"Wages growth also remains modest and it is likely to be some time yet before aggregate wages growth is at a rate consistent with inflation being sustainably at target."
Financial markets have been pricing in the risk of a rise in the cash rate by mid-year, while economists appear to be gravitating to the August board meeting.
Since the board's last gathering the unemployment rate has dropped to 4.2 per cent, a year earlier than the RBA had been predicting, while inflation is also running well ahead of its expectations.
"The board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve," Dr Lowe said.
Prior to the meeting, federal minister Jane Hume played down the impact of a potential rate rise on households, while issuing a reminder that the RBA is an independent body and makes decisions that are separate from government.
"Interest rates have been at an historical low now for a considerable period of time," she told Sky News.
She conceded that the cost of living is high, and there is pressure on household budgets and interest rates will have an effect on that.
"The fact that Australians have more money in pockets now, thanks to the Morrison government's economic responses to COVID-19, there are tax cuts, there are more people employed now ... that's something I think that gives us cause for optimism," Senator Hume said.
Labor frontbencher Jason Clare was not so optimistic, saying whoever wins the federal election in a few months time will face higher interest rates.
"That will mean, for a lot of Aussies who stretch themselves to get a mortgage, then it's going to be tougher to pay a mortgage in the future," he told Sky News.
"Of course, that's all going to happen at a time where other things are going up - childcare costs are going up, the cost of petrol is going up. The only thing that's not going up at the moment is wages."
