The Reserve Bank has kept interest rates on hold at 4.35 per cent.
It means rates will remain at this level for another six weeks, until the RBA Board's next meeting in mid-June.
In a statement announcing its decision, the RBA Board said while the economic outlook remained uncertain it will "remain vigilant to upside risks."
"The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out," it said.
"The Board will rely upon the data and the evolving assessment of risks. In doing so, it will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.
"The Board remains resolute in its determination to return inflation to target," it said.
RBA governor Michele Bullock said the Board discussed the possibility of raising rates in its meeting this week, and the fight against inflation wasn't over.
"I think we've always felt that it was a bit too soon to declare victory," she said in her post-meeting press conference.
"And I think the numbers in recent weeks have demonstrated that for us.
"We don't think we necessarily have to tighten again, but we can't rule it out. If we have to, we will," she said.
Reserve Bank willing to lift rates
In recent weeks, some economists and market commentators had been pressuring the RBA Board to lift rates, arguing recent upside-surprises in inflation could keep inflation higher for longer.
But the RBA Board's decision to keep rates steady follows last week's news that retail spending fell by a surprisingly-large amount in March.
The decline in retail spending in March was the weakest on record, outside of the pandemic period and introduction of the GST, and it prompted other economists to warn about the pressures millions of households were under.
"Australian households are struggling and retail conditions are dire," Callam Pickering, APAC economist at global job site Indeed, warned last week.
"Further tightening in the current environment would leave the nation at clear risk of severe downturn or recession," he said.
But Warren Hogan, the chief economic adviser at Judo Bank who has been arguing the RBA may be forced to lift rates three times before year's end, says the RBA Board's statement on Tuesday suggests it's setting the scene for future rate hikes.
"They're saying that inflation is going to be very slow to get down, their patience is being tested, and there are upside risks to inflation," Mr Hogan told the ABC.
"So there's a bit of language there that suggests that they're moving towards a rate hike, but I wouldn't expect to see it until maybe August, if indeed the economy proves to be resilient enough and inflation [is] sticky enough to justify it," he said.
RBA does not want to tip economy into recession, Bullock says
On Tuesday, Governor Bullock said when the RBA lifted rates in November, from 4.1 to 4.35 per cent, it was "taking out a little insurance."
And, she said, when economic data looked relatively soft in December and at the start of this year, it led many people to believe that the fight against inflation had been won — but that belief was premature.
However, she said the RBA Board was also conscious of the risks involved in lifting rates too high, because of the damage it could do.
"We don't think we necessarily have to tighten again, but we can't rule it out," she said.
"Conditions are restrictive. We know that interest rates impact different sectors of the economy and different households [in different ways], and what we are really trying to do is slow things enough to bring inflation down without tipping the economy into recession.
"I hope that we don't have to raise interest rates again, but having said that, if we think we have to, we will."
Ms Bullock said petrol prices were high at the moment and they were going to have a big influence on the RBA's inflation forecasts in coming months, just to complicate things.
"[They are] going to be a little bit elevated in the near term, in the next six months, and then [they are] going to come down," she said.
"Inflation at the moment is still declining, but it's declining less quickly than we thought it would."
She said financial conditions were already restrictive for households, and small businesses were under pressure too, but big businesses were managing somewhat better.
RBA tweaks its inflation forecasts
The RBA's latest Statement on Monetary Policy (SOMP), released at the same time as its rate decision, certainly fits in with the "higher for longer" rates narrative.
While the RBA is sticking to its previous forecast that inflation will return to the top of its 2-3 per cent target before the end of 2025 and reach the middle of that range by mid-2026, it has raised its short-term inflation forecasts.
It is now expecting headline inflation to remain stuck around 3.8 per cent over both the year to June and the year to December, up around half a percentage point from the previous forecast made in February.
A major contributor to the upgrade has been the recovery of fuel prices on growing Middle East tensions, expected to add about 0.2 percentage points to the annual CPI number.
The anticipated end of the federal government's electricity subsidies is expected to add 0.3 percentage points to inflation, but that might not occur if the Albanese government chooses to extend similar support to households in next week's budget.
The RBA's preferred "core" measures of inflation, such as the trimmed mean, are not expected to be quite as stubborn, falling to 3.4 per cent by year's end.
Higher than expected inflation is why market pricing points to an even chance of one further interest rate rise this year, before rates start falling in 2025.
However, even without another rate rise, households are already struggling under record scheduled mortgage repayments, expected to reach around 10.5 per cent of household disposable income as remaining cheap fixed mortgages roll off onto much higher variable rates.
"Scheduled principal and interest payments for mortgages are at a historically high share of household disposable income," the RBA noted in the report.
"Even so, total household debt payments (including estimated repayments on consumer credit) remain slightly below the estimated 2010-11 peak when the cash rate reached 4.75 per cent, because of a significant decline in the use of consumer credit since 2008."
The bank has slashed its forecasts for household consumption, which is expected to have flatlined over the year to June at just 0.1 per cent growth, down from the RBA’s already weak forecast of 0.8 per cent growth back in February.
The bank says that a combination of struggling indebted households, higher than expected saving rates for better-off households, a sharp fall in discretionary spending, and an expected slowdown in international student arrivals amid tougher visa tests will weigh on total consumption.
The figure would be worse if not for population growth that had been running at about 2.5 per cent in 2023, but is forecast to slow down to 2 per cent over the year to June and 1.5 per cent over 2024 as a whole.
Despite the recessionary picture for household consumption, which makes up roughly 60 per cent of the economy, the RBA has only slightly tweaked down its already low forecast of GDP growth to 1.2 per cent for the year to June 30.
That number is being propped up by government spending, which has been revised up by a full percentage point to 3.2 per cent over the year to June, along with business investment, where growth is slowing from a December peak of 8.3 per cent to just 1.5 per cent, but that is still an upward revision on the February SMP.