The Reserve Bank of Australia has opted to leave interest rates unmoved, marking 12 straight months at 4.35 per cent.

All bets were on no change ahead of the central bank board’s decision on Melbourne Cup day.

The call follows welcome progress on inflation but not enough for the central bank to start cutting the cash rate.

Price pressures have been ravaging households and businesses but are starting to ease, with annual headline inflation printing at 2.8 per cent in the September quarter, 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.

“While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,” the board said in a statement. 

“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.

“This reinforces the need to remain vigilant to upside risks to inflation and the board is not ruling anything in or out.”

Most economists expect interest rate cuts to start next year, with many tipping a February start.

This post was originally published on Michael West.