The Reserve Bank of Australia (RBA) left the cash rate steady at 4.75 per cent at its regular monthly board meeting on Tuesday.

The decision was expected, with all 12 economists surveyed last week by AAP predicting the RBA would keep rates on hold.

The central bank’s board last raised the rate from 4.5 per cent in November 2010.

RBA governor Glenn Stevens said the outlook for the global economy was less clear than it was earlier in the year.

Mr Stevens said uncertainty on global financial markets was “reducing confidence and may result in more cautious behaviour by firms and households in major countries.”

In addition, the board said it expected inflation to decline towards the end of the year, as temporary weather-related effects reverse.

However, the RBA remained concerned about the medium-term outlook for inflation.

“A key question will be the extent to which softer global and domestic growth will work, in due course, to contain inflation.”

A number of forecasters had scaled back their global growth estimates over the past couple of months, he said.

HSBC chief economist Paul Bloxham said the rates decision and the short statement that followed it was not a surprise.

“We expected them to be on hold and we expected that they would be on hold with an eye on inflation,” he said.

“Despite the fact that (global) markets have been unsettled, they are still focused on the medium-term outlook for inflation.”

Mr Bloxham said the key question was, could softer economic growth in the global and maybe the domestic economy be enough to contain inflationary pressures.

He said the medium-term concerns about inflation would be enough to rule out any prospect of interest rate cuts to stimulate growth.

“Global financial markets continue to be volatile today but we still think the hurdle for a direction change (in monetary policy bias) is still high,” Mr Bloxham said.

“You’re not likely to see cuts anytime soon.”

JP Morgan interest rate strategist Sally Auld said the fixed income market showed a slight reaction to the RBA’s decision, with yields going up a touch.

“There’s nothing in this that we didn’t already know and because of that we’re seeing a pretty muted reaction in rates markets,” she said.

The futures market was pricing in a 25 basis point rate cut by October and for a total of around 75 basis points cut by the year’s end, Ms Auld said.

Macquarie Group senior economist Brian Redican said the RBA board had adopted a more “slightly more dovish tone” at their August meeting, with no sign of a rate hike in sight.

Unlike the August board meeting, there was no suggestion in governor Stevens’ statement that the board had considered raising rates on Tuesday.

“The RBA still think that Australian growth will be at trend or better in the medium term and they are still worried about medium-term inflation,” Mr Redican said.

“So there are certainly no signs they are considering cutting rates.

“But rate hikes in the near term seem to have fallen off the agenda.”

Mr Redican said the RBA appeared content to continue its wait-and-see approach until economic events overseas played out.

“They do seem to becoming more concerned about the outlook for the US and Europe in particular,” Mr Redican said.

“Having said that, they don’t think that is affecting other regions.”

Mr Stevens said Australia’s near-term growth outlook was weaker than expected a few months ago.

Beyond the near term, growth was still “likely to be at trend or higher, unless the world economic outlook continues to deteriorate”.

Nomura chief economist Stephen Roberts said the central bank may revert to its tightening course in 2012, should the global economic outlook regain some form of stability.

He said most domestic economic indicators were strong and the RBA would be keen to control any associated inflationary pressures in the medium term by increasing the cash rate.

“Private capex is very strong, national income is growing very strongly as well, and our terms of trade are at a record high,” Mr Roberts said.

But for now, the RBA appeared to be fairly committed to keep interest rates on hold due to the high level of uncertainty in global economies, he said.

“They’re uncertain about what the European and US problems will mean for other regions but prices for Australian producers are still high.”