RBA holds cash rate at 4.35% as expected

The news: The Reserve Bank has kept the cash rate target on hold at 4.35%, in line with expectations, as the central bank continues to observe the impact of last month's hike.

The numbers: Last month, the RBA lifted rates by 25 basis points for the first time in four months. Headline inflation was 5.4% in the year to the September quarter, still above the RBA's 2%-3% target band. Australia's quarterly GDP figures are due tomorrow, with analysts expecting them to hold steady from last month's result at 0.4%.

The context: RBA governor Michele Bullock said inflation continued to erode household savings and remained the central bank's top priority. While there had been encouraging signs on goods inflation abroad, she said, services price growth remained sticky and could occur in Australia. Any further potential rate rises would depend on the evolution of risks, such as weak growth in China's economy, Australia's tight labour market and an uncertain outlook for household consumption.

What they said: "The impact of the more recent rate rises, including last month's, will continue to flow through the economy," Bullock said in a statement.