The wait for interest rate cuts may be even longer as the Reserve Bank of Australia stares down underlying inflation it says is still too high.
All bets were on no change when the central bank board announced its decision before the Melbourne Cup on Tuesday.
But the tone struck in the post-meeting statement and the press conference with governor Michele Bullock came as more of a surprise, with the central bank still keeping its options open on its next move.
"The November statement of monetary policy forecasts suggest that it will be some time yet before inflation is sustainably in the target range and approaching the midpoint," the post-meeting statement read.
"This reinforces the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out."
National Australia Bank head of markets economics Tapas Strickland said the RBA statement maintained its "mild hawkish bias".
The bank's economic team is still expecting a cut in February, though Mr Strickland said the risks skewed later.
"Overall the path to a February rate cut, which had already narrowed following recent data, looks even more narrow following today’s presser," he said.
In the post-meeting press conference, Ms Bullock said inflation was easing but reminded households the price level would not fall.
"We can bring inflation back down, but that doesn't mean that prices go back to where they were two years ago," she said.
"That's why it's really important to get inflation back down to around about two per cent because it means that the price level isn't ratcheting up and compounding on itself, which is what we're observing."
In the September quarter, annual headline inflation printed at 2.8 per cent, within the RBA's two-three per cent target range.
Yet the focus has been on underlying inflation, which has been moderating but still above target at 3.5 per cent in September.
Fresh forecasts from the central bank point to slightly softer-than-expected inflation profile and a weaker economy.
The trimmed mean was downgraded slightly to have it back within target six months earlier, hitting three per cent by June 2025.
Economic growth forecasts were trimmed, with GDP peaking at 2.3 per cent in 2025.
The weaker growth in the near term was because of softer private demand as well as slower expected growth in net overseas migration due to the federal government’s tighter student visa policy.
Unemployment is now anticipated to peak a little higher, at 4.5 per cent. The profile for wage growth was downgraded modestly.
It was important not to be complacent on inflation, but it was clear interest rate hikes had done their job, Deloitte Access Economics partner Pradeep Philip said.
"Like a cautious punter stubbornly backing the favourite as the odds shift under it, today's monetary policy decision shows the Reserve Bank of Australia is unwilling to walk away from high interest rates, even as the case for a rate cut continues to make up ground," he said.
