The Reserve Bank of Australia has kept the cash rate on hold for November, citing higher than expected inflation and signs of improvement in the global economy.
The RBA kept the cash rate on hold at 3.25 per cent at its monthly board meeting on Tuesday, after cutting it by a quarter per cent at its October board meeting.
Futures markets had priced in around a 50 per cent chance of a rate cut.
In a statement accompanying the decision, RBA governor Glenn Stevens said recent inflation data had contributed to the board's decision.
"At today's meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being," he said.
Figures released by the Australian Bureau of Statistics in October showed consumer prices rose 2.0 per cent in the year to September while underlying inflation growth was at 2.5 per cent - in the middle of the RBA's target range.
Mr Stevens said there were positive signs for the global economy from China and the US.
"The United States is recording moderate growth, while recent data from China suggest growth there has stabilised."
Meanwhile, he said commodity prices remained lower relative to the start of the year but the terms of trade were likely to remain high compared to historic levels.
Macquarie senior economist Brian Redican said the RBA appeared to be taking a more positive view of how Australia's economy was going.
"They're definitely back to the `glass is half full' view of things," he said.
"The key thing is that they've moderated their discussion about a peak in the mining boom.
"They're still saying it will peak in the next year, but the implication is that they're only going to monitor the economy as that peak approaches - so it's a very reactive stance, rather than a proactive one."
He added that given this complacent tone, there was no suggestion that the RBA might cut rates at its next meeting in December, although a significant weakening in economic data could change this.
HSBC Australia chief economist Paul Bloxham said the larger than expected rise in consumer prices in the September quarter had motivated the RBA's decision to keep rates on hold.
"They got a little bit of a surprise on the inflation numbers and the global economy has stabilised a bit so they decided to sit still for the moment," he said.
Despite futures markets pricing in another cut in either December or February, Mr Bloxham said Tuesday's decision suggested the cash rate may not go much lower.
"We could be nearing the end of this easing cycle."
RBC fixed income and currency strategist Michael Turner said the decision not to adjust the cash rate was surprising.
"The market was 50-50, we thought the odds were in favour of a cut," he said.
"The CPI (consumer prices index) was obviously a little bit higher than they expected and the global growth stabilised, so they couldn't see a strong enough case to cut in November."
The RBA said that growth is close to trend even though there has been falls in commodity prices and a slowdown in the mining sector.
"That's about the quarters ahead rather than the data that they were referring to in the statement," Mr Turner said.
Mr Turner said he expects the RBA to next cut its interest rate early in 2013.