Australia’s central bank held its key interest rate at a 13-year high while adding it’s “gaining some confidence” inflation is moving sustainably toward target, prompting traders to boost bets on an easing in February.

The Reserve Bank of Australia kept interest rates on hold as expected, but said it is gaining confidence that inflation is on track to sustainably return to the target band.

RBA Board meeting surprised markets due to the changed tone of the RBA statement, indicating the RBA Board was growing more confident inflation is moving back towards the central bank’s target. Markets now see an increased chance the RBA will cut interest rates sooner,

The central bank has delivered its last rate decision for 2024. The Reserve Bank of Australia (RBA) has announced another rate hold amid stubborn inflation and faltering economic growth. The RBA left the cash rate unchanged at 4.35 per cent for the ninth consecutive time.

Diana Mousina of AMP Investments says the RBA could move on interest rates in February, but believes sticky inflation and a tight labor market will prompt the central bank to hold on rates until May 2025.

Money markets have continued to improve the chance of a February rate cut following the Reserve Bank's change of language about the future of interest rates on Tuesday.