The Reserve Bank of Australia left its main policy rate, the cash rate, on hold at 3.85 percent at its meeting today. This decision was a surprise, with the consensus expecting a second consecutive reduction of 25 basis points.

In the statement accompanying today's decision, official noted recent declines in inflation and expressed optimism that risks to the inflation outlook remained balanced after they were more concerned previously about upside risks. They noted, however, that monthly inflation data indicates that quarterly inflation in the three months to June will be stronger than they had previously expected.

Having already cut policy rates by 50 basis points in recent months, this uncertainty about near-term inflation prospects means officials are cautious about loosening policy too aggressively. As a result, they judged today that they could wait for a little more information to confirm that inflation remains on track to reach 2.5 per cent on a sustainable basis.

The statement shows, however, that today's decision was not unanimous, with only six of the nine members voting to keep policy rates on hold. In the post-meeting press conference, RBA Governor Michele Bullock advised that a majority of members"decided to wait a few weeks to confirm that we're still on track to meet our inflation expectation", further noting that"the decision today was about timing rather than direction. This suggests that there is a good chance that a majority of members could support a rate cut at the next meeting if data provide greater confidence about the inflation outlook.

Forecasters uniformly expect another 25 basis point rate cut to 3.60 percent after the RBA cut by the same amount last time. The ongoing action reflects much weaker than expected consumer spending in the face of high inflation and high interest rates.

The Reserve bank of Australia (RBA) announces its monetary policy with regard to interest rates on the first Tuesday of each month with the exception of January when it is on vacation. The RBA is the central bank of Australia and its duty is to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people. It does this by setting the cash rate to meet an agreed medium-term inflation target, working to maintain a strong financial system and efficient payments system.

The Reserve Bank of Australia's (RBA's) main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board with the objective of achieving low and stable inflation over the medium term. Other responsibilities include maintaining financial system stability, while at the same time promoting the safety and efficiency of the payments system. The RBA regards appropriate monetary policy as a major factor contributing to the Australian dollar's stability, which in turn leads to full employment and the economic prosperity for Australia.

The RBA is unique among the central banks - it has two boards with complementary responsibilities. The Reserve Bank Board is responsible for monetary policy and overall financial system stability. The Payments System Board has specific responsibility for the safety and efficiency of the payments system.

The RBA sets an interest rate at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.