While the news will be welcomed by mortgage holders, Reserve Bank governor Michele Bullock said the board was not confident enough to rule further cash rate movements "in or out".

However she said the central bank was on the right path to get inflation back to target.

"The war is not yet won," Ms Bullock said.

"We understand that households are still bearing the brunt of this inflation challenge.

"We see it in the weak consumption data and we know there is a big cost-of-living squeeze on households."

The decision to pause the cash rate for the second time this year was widely expected, with the rate of inflation having dropped to 4.1 per cent.

In a statement, the Reserve Bank said that although recent data indicated inflation is easing, it remains high.

"The board expects that it will be some time yet before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the board is not ruling anything in or out," it said.

It said higher rates were helping tame inflation.

"Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy. Accordingly, conditions in the labour market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target," it said.

"Wages growth picked up a little further in the December quarter, but appears to have peaked with indications it will moderate over the year ahead. Nevertheless, this level of wages growth remains consistent with the inflation target only on the assumption that productivity growth increases to around its long-run average.

"Inflation is still weighing on people's real incomes and household consumption growth is weak, as is dwelling investment."

All 40 economists polled by Reuters forecast the RBA would leave the cash rate unchanged in March. The four major banks had also predicted a cash rate pause.

A survey of 41 economists by comparison website Finder found all experts also predicted a cash rate hold.

CreditorWatch chief economist Anneke Thompson said a cash rate pause was expected given a "lack of any meaningful data" that would lead to further inflation rises.

"In fact, national accounts data released earlier in the month provided solid evidence that monetary policy tightening is having its intended impact on domestic demand," she said.

The consumer price index rose 0.6 per cent in the December 2023 quarter, the smallest quarterly rise since March 2021.

The annual rate of inflation was down to 4.1 per cent, the slowest pace in two years.

The RBA board said returning inflation to target within a reasonable timeframe was its priority.

"The central forecasts are for inflation to return to the target range of 2-3 per cent in 2025, and to the midpoint in 2026," it said.

It also warned that unemployment was expected to rise further.

The recent inflation figures fuelled talks of a possible cash rate cut in 2024, however borrowers have been warned not to get their hopes us.

It was the board's second cash rate decision of the year, with the central bank now meeting eight times a year instead of the previous 11 scheduled meetings.

CoreLogic research director Tim Lawless said the decision would boost confidence.

"Alongside lower inflation and a growing expectation that interest rates will reduce later this year, [it] should help to provide a further lift in confidence," he said.

"The RBA expects services inflation to decline only gradually, making the timing for a rate cut highly uncertain and dependent on further progress in reducing inflation emanating from the services sector."