As expected, the Reserve Bank of Australia (RBA) has left the cash rate unchanged at 4.35 per cent following its final board meeting for 2023.

Economists and the market were widely in agreement that the central bank would remain on hold in December, with many viewing February 2024 as the next potential opportunity for a move once the next quarterly inflation figures and other key data has been released.

The RBA’s last move - a 25 basis point hike in November - came after an upside surprise in the September quarter consumer price index (CPI), with the bank indicating a “low tolerance” for evidence of slower progress to its 2 to 3 per cent inflation target.

However, the latest monthly CPI indicator published late last month showed that inflation cooled from 5.6 per cent in September to 4.9 per cent in October, which some economists have interpreted as showing that inflation is now tracking below the RBA’s forecasts.

Ahead of Tuesday’s rate decision, Westpac chief economist and former RBA assistant governor (economic) Luci Ellis assessed that a hike in December was “unlikely”.

“Not enough new information has come to hand since [November] to warrant delivering a second increase just yet. The monthly CPI indicator is volatile, but the October reading was a bit below expectations,” she said.

“The RBA is still ready to raise rates further if it sees further upside surprises on inflation. It has no tolerance for more delays in the return to the inflation target.”

According to Ms Ellis, the RBA’s February 2024 meeting is “still live”. By then, the central bank will be able to refer to the December quarter CPI, the September quarter national accounts and other data releases in making its first decision of the new year.

“We reaffirm our view that the RBA board would raise the cash rate at that meeting if it sees further upside surprises to inflation or fresh evidence suggesting that inflation will decline more slowly than it intends,” she continued.

“If things play out broadly in line with their forecasts, though, further moves would be harder to justify. In that case, it would be likely that the RBA would hold the cash rate steady. Currently we believe this is the more likely outcome.”