By Poppy Johnston in Canberra

Borrowers are still waiting for interest rate relief but there’s hope on the horizon as the Reserve Bank of Australia says it’s “gaining some confidence” in the inflation path.

As widely expected by economists and financial markets, the central bank board left interest rates on hold at 4.35 per cent at its final meeting of 2024 on Tuesday.

While the board maintains underlying inflation is “too high”, language in the key final paragraphs of the post-meeting statement suggests members are becoming less concerned about higher-than-expected price growth.

“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.

“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.

“Recent data on inflation and economic conditions are still consistent with these forecasts, and the board is gaining some confidence that inflation is moving sustainably towards target.”

Australia’s annual headline inflation rate is back within the RBA’s two-three per cent target range but the focus has been on still-elevated underlying price pressures.

Underlying inflation is about 3.5 per cent, “still some way from the 2.5 per cent midpoint of the inflation target”, the board said in its statement.

Stretched mortgage-holders have been keenly awaiting interest rate cuts and while economists and markets are in broad agreement the next move will be down, speculation over the timing of easing continues.

Oxford Economics Australia head of macroeconomic forecasting Sean Langcake said the board had become a little more hopeful on the outlook, observing some upside inflation risks had eased.

“Their statement noted that wage growth came in slower than expected in the September quarter, and that they are gaining confidence that inflation is moving sustainably toward target,” he said.

“But this does not mean rate cuts are imminent.”

Before lowering borrowing costs, the economist believes the central bank will want to see two more sets of quarterly inflation data showing easing underlying price pressures.

That brings the easing start date to May, in Mr Langcake’s view.

ANZ, Westpac and NAB expect cuts in May, while Commonwealth Bank is still tipping February.