The Reserve Bank of Australia (RBA) has dashed mortgage holders' hopes of a third consecutive interest rate cut by keeping the cash rate on hold at 3.5 per cent.
The decision by the RBA board on Tuesday comes after the central bank cut the cash rate by half a percentage point in May and a quarter of a percentage point in June.
In a statement accompanying the decision, RBA governor Glenn Stevens said the Australian economy grew faster than expected in early 2012, although there were signs of weakening in Europe and China.
He said the RBA expected inflation to remain within the RBA's target band of two to three per cent.
"At today's meeting the board judged that with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate," he said.
But he said growth in domestic costs would need to slow over the longer term to maintain inflation within that band.
Mr Stevens said interest rates charged by banks had fallen in recent months as a result of the RBA's recent rate cuts.
"Interest rates for borrowers have declined, to be a little below their medium-term averages," the statement said.
"Business credit has increased more strongly in recent months, though credit growth remains modest overall."
HSBC economist Paul Bloxham said the RBA's statement was certainly not dovish.
"Unless events change, they won't be rushing to alter monetary policy in the short term at least," he said.
"They'd want to see the effect of all the easing that's happened."
Mr Bloxham also noted that economic growth had been stronger than indicated.
"From that you'd have to conclude that they're in no hurry to cut interest rates again," he said.
CMC chief market strategist Michael McCarthy said that previous cutting action by the RBA - plus improved data - had kept the central bank's hand steady.
"The jobs and growth data from the first quarter (of 2012) were pointing to a wait and see attitude, particularly since they'd cut twice in the last two months," he said.
"So the decision was very much in-line with expectations."
St George chief economist Hans Kunnen said the RBA's statement hadn't changed the outlook for further interest rate cuts this year.
"They never yell too loudly about future intentions but we still think events will unfold that will allow them to move," he said.
"We still expect them to cut rates again after the CPI (consumer price index or inflation) is released (on July 25)."
The futures market was pricing in an interest rate of 2.80 per cent by the end of 2012 following the decision, up from 2.75 per cent before the announcement, suggesting market expectations of three more rate cuts this year had waned slightly.
Meanwhile, comparison site RateCity said that the RBA decision meant mortgage holders should be paying an annual interest rate of less than six per cent.
"The average standard variable rate now stands at 6.39 per cent, but borrowers with a 20 per cent deposit or 20 per cent-plus equity should be aiming for a rate of below six per cent," spokeswoman Michelle Henderson said.
