The Reserve Bank has left interest rates on hold for a second month in a row after recent data showed inflation is easing faster than anticipated.

Meeting on Tuesday, central bankers left the cash rate target at a decade-high 4.1 per cent for August, sparing millions of homeowners the pain of yet another 0.25 percentage point increase.

Reserve Bank governor Philip Lowe said inflation is heading in the right direction after June quarter figures published last week showed the pace of price growth has eased off markedly from the December 2022 peak.

“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 again decided to hold interest rates steady this month.

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

The pause means monthly repayments on a typical $500,000, 25-year home loan will not rise another $78 dollars as they would have done if the RBA decided to increase rates in August.

But the effects of 12 previous hikes, which have added more than $1100 to mortgage bills, are still being felt across the nation, pushing more than a million homeowners into financial stress.

A majority of economists had expected the August pause, though a notably minority had tipped a hike, with experts in agreement that each successive RBA rate call in 2023 is finely balanced.

Central bankers want the annual inflation rate to fall from 6 per cent back to their 2 – 3 per cent target by mid-2025, but whether higher interest rates are needed to achieve that is still unclear.

Dr Lowe reiterated on Tuesday that further rate hikes “may” be needed, echoing the guidance provided by central bankers at earlier meetings.

“That will depend upon the data and the evolving assessment of risks,” he said.

“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market.”

One key uncertainty is whether prices for services – as opposed to goods – increase faster than the RBA is comfortable with in late 2023.

There were few signs of a massive escalation in services inflation over the June quarter, but economists say it remains a risk if wages growth continues increasing against a backdrop of lacklustre productivity gains.