The Reserve Bank has left interest rates on hold at 4.35 per cent.

The cash rate will remain at 4.35 per cent for another six weeks, until the RBA board's next meeting in early November.

The decision to keep rates steady was expected by traders and economists, but it was made in the face of growing calls from parts of the community for a rate cut.

It followed last week's decision by the US Federal Reserve to cut rates by a hefty 0.5 percentage points in the United States, with more cuts flagged for the world's biggest economy.

That decision saw the US joining the European Union, the United Kingdom, Canada, New Zealand, Denmark, Switzerland, China, and many other countries in cutting rates in recent months.

On Tuesday morning, hours before the RBA's latest decision was confirmed, the People's Bank of China announced another round of rate cuts and stimulus measures for China.

With multiple countries now cutting rates as Australia's cash rate remains steady, the value of the Australian dollar has this week hit 68.53 US cents, which is its highest level for 2024.

Currency analysts say Australia's dollar could rise to 70 US cents within months.

More evidence needed that inflation is falling

In a statement on Tuesday, the RBA board said inflation was still too high for interest rates to be cut.

"Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance," it said.

"But inflation is still some way above the midpoint of the 2–3 per cent target range.

"In underlying terms … inflation was 3.9 per cent over the year to the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP).

"The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range."

RBA governor Michele Bullock has repeatedly said in recent months that she would like to see more evidence that inflation is definitely falling before she thinks about cutting rates.

In early August, she said she didn't expect to cut rates this year, given the way Australia's economy was travelling.

Then in early September, new data showed Australia's economy had just recorded its slowest annual growth rate since the recession in the early 1990s.

But last week, new employment data showed Australia's labour force in August was still operating very close to recent historical tightness.

The RBA board has noted that ongoing strength in the labour market.

"Broader indicators suggest that labour market conditions remain tight, despite some signs of gradual easing," it said on Tuesday.

"Taken together, the latest data do not change the Board’s assessment at the August meeting that policy is currently restrictive and working broadly as anticipated. But there are uncertainties.

"While headline inflation will decline for a time, underlying inflation is more indicative of inflation momentum, and it remains too high," it said.

Things turn political and calls to cut rates grow

Speaking to journalists on Tuesday, Ms Bullock declined to respond to recent criticisms of the RBA.

Earlier this month, Treasurer Jim Chalmers said the RBA's rate hikes were "smashing the economy", and former Labor treasurer Wayne Swan accused the RBA of "putting economic dogma over rational decision-making" by refusing to cut rates at this point in the cycle.

"If you look at markets, they're all forecasting rate drops. They're going down around the world," he said.

Former RBA governor Bernie Fraser has also argued the RBA should be cutting rates because "recessionary risks" are looming.

But on Tuesday, Ms Bullock said she wanted to "stay out of the politics of it". 

She said the RBA was simply doing what it thought was best.

She said underlying inflation was still too high in Australia and she did not expect it to fall back to 2.5 per cent until 2026, so the RBA's job was far from finished.

"We've still got employment growing, which is really positive," she said.

"We still think we're on that path where we're managing to [bring inflation down] without resulting in a large increase in the unemployment rate."

Economists do not expect a rate cut soon

Market economists roundly expected the RBA to keep rates on hold for another six weeks.

David Bassanese, chief economist at BetaShares, said those hoping for a rate cut soon would be disappointed.

"With the labour market still considered tight, and aggregate consumer spending holding up due to the influx of foreign students and tourists, it's a forlorn hope to expect the RBA to provide interest rate relief anytime soon," he said.

HSBC chief economist Paul Bloxham said Australia's economic problem was "quite unique" and the nation was looking different to other countries, with inflation that was proving to be stickier.

"I don't think they're going to be cutting until well into 2025, and I think that's because the core inflation story is still too persistent" he told the ABC.

"Normally we think about inflation picking up, and then interest rates get lifted, and then inflation comes down and interest rates get to be cut. 

"But this cycle has a bit of a different rhythm to it and a lot of it has to do with the fact that the supply side of the economy, productivity in particular, have been a lot weaker and really hasn't turned around."

EY chief economist Cherelle Murphy said Wednesday's monthly inflation indicator might end up showing that inflation dipped below 3 per cent in August, but that still would not change the broader economic story.  

"With a relatively tight labour market, poor productivity growth and elevated government spending, the risks remain weighted towards underlying inflation remaining too high," Ms Murphy said.

"The pace of government spending needs to be contained across both the Commonwealth and states to give the economy the best chance at finding a balance where there is no more upward pressure on inflation. 

"Spending by governments is currently adding stimulus at a time when the economy is capacity constrained, meaning the journey to lower rates is slower than it needs to be.

"Our central expectation remains that the Reserve Bank will hold the cash rate steady for the remainder of the year."