At its meeting on Tuesday, the Reserve Bank decided to leave the official cash rate on hold at 4.10%, though the statement released by the central bank once again indicated that rates may need to be raised again in future.

RBA governor Philip Lowe said that “higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so”.

Data from last week supported the decision for a pause in rates as annual inflation fell to 6 per cent in the June quarter from 7 per cent in March, and there was an unexpected reduction in retail spending in June.

The bank also indicated that it does not expect inflation to be back within the target range of 2-3 per cent until late 2025, having previously indicated that inflation would hit the top end of the range in June 2025.

At the time of writing, markets rallied 0.4 per cent after the central bank’s decision.

If the US Federal Reserve raises interest rates at their next meeting in September, the Reserve Bank may be forced to make some tough decisions in upcoming meetings.