Australia's Reserve Bank has kept the nation's cash rate at the record low 0.1 per cent, for the 12th month in a row.

It also pledged to continue pumping stimulus into the economy, by purchasing $4 billion worth of government debt each week, until at least mid-February.

But the central bank has dumped one of its key stimulus measures, known as "yield curve control" — which was introduced in March 2020, shortly after the COVID-19 pandemic struck.

It involved the RBA buying billions of dollars in Australian government three-year bonds, to artificially drive its yield (or return) down to 0.1 per cent.

Markets have interpreted this move as a concession from the RBA — that borrowing costs may have to rise sooner than expected.

Last week's surprisingly strong core inflation figures (2.1 per cent) led to speculation that the central bank would be forced to start winding back its COVID-era stimulus.

The cost of living rose sharply in the September quarter due to record high petrol prices, the increasing cost of building new homes and the global supply chain disruptions.

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"The Australian economy is recovering after the interruption caused by the Delta outbreak," RBA governor Philip Lowe said in his post-meeting statement.

The RBA is expecting the Australian economy to grow by 3 per cent this year, then by 5½ per cent and 2½ per cent in the following two years.

However, he said the RBA's decision to abandon yield curve control was due to "improvement in the economy" and the "earlier-than-expected progress towards the inflation target" (2 to 3 per cent).

"Given that other market interest rates have moved in response to the increased likelihood of higher inflation and lower unemployment, the effectiveness of the yield target in holding down the general structure of interest rates in Australia has diminished."

Dr Lowe has repeatedly said: "The [RBA] Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.

"This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time."

In previous statements, the governor consistently said rates are unlikely to be lifted "before 2024". He did not make that reassurance this time.