The Reserve Bank has delivered a mortgage reprieve in July, pausing interest rates to await fresh inflation data that will help determine whether more action is still needed.

The cash rate target will stay on hold at decade high 4.1 per cent, sparing millions of Australian families from another repayment squeeze after 12 agonising rate hikes over the past 15 months.

It’s the second pause since central bankers began raising interest rates from a record low back in May 2022, following a similar reprieve in April as central bankers awaited new economic data.

RBA governor Philip Lowe said on Tuesday that the July pause would provide a similar opportunity for fresh inflation signs, with all-important June quarter price growth data due later this month.

He also recognised that much of the RBA’s record-breaking hike cycle to date still hasn’t flowed through to family budgets.

“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” Dr Lowe said.

“In light of this and the uncertainty surrounding the economic outlook, the board decided to hold interest rates steady this month.

“This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.”

Economists were split on whether the RBA would hike in July, particularly after monthly figures published last week showed inflation fell faster than expected in May, stoking hopes of a pause.

AMP economist Shane Oliver, who tipped a pause, thought July was nevertheless a “close call” .

“The bigger-than-expected fall in inflation in May gives the RBA scope to pause in July to better allow for the lagged impact of past rate hikes,” he said ahead of Tuesday’s decision.

“But still-too-high underlying inflation and worries about wages growth point to a further increase in rates in the months ahead.”

Average monthly mortgage bills have still risen about $1300 since May 2022, despite the July pause, according to Finder data.

That’s sparked a surge in mortgage stress, with many recent home buyers, in particular, forced to spend huge portions of their incomes on repayments instead of other budget priorities.

Dr Lowe said on Tuesday that further rate hikes could still be on the horizon, adding weight to major bank forecasts that the cash rate target will rise again to 4.6 per cent during August.

“The board remains alert to the risk that expectations of ongoing high inflation will contribute to larger increases in both prices and wages, especially given the limited spare capacity in the economy and the still very low rate of unemployment,” he said.

But the path for rates, Dr Lowe reiterated, was not pre-set and could change based on incoming data on the jobs market and crucial June quarter inflation figures slated for July 26.

The RBA wants to see signs that price growth is easing fast enough to return annual inflation from 7 per cent in the March quarter to the 2-3 per cent target band by midway through 2025.

Dr Lowe said in June that this strategy could be derailed by rising wages growth, which will be consistent with easing price growth only if productivity growth returns to pre-pandemic levels.