The RBA has pressed pause on its historic cycle of interest rate hikes, keeping the cash rate target on hold at 4.10%.

Presented with softening inflation data - fell to 5.6% in May - the RBA board decided to err on the side of caution and wait for the effects of 12 interest rate hikes to flow through to households and economic data.

Experts and economists had been divided over the July decision, with major bank economists at odds over whether the Board would increase for the 13 month or pause. 

Lone ranger CommBank forecast the pause, while ANZ, NAB, and Westpac thought a 25 basis point hike was on the cards.

It’s welcome news for homeowners after 12 rate rises, with the cash rate being the only way for Australia’s central bank to try to curb sticky inflation.

In his monetary statement, Governor Philip Lowe said it was appropriate to pause the rate hike cycle to assess the economy.

"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."

PRD Chief Economist Asti Mardiasmo said the RBA had two ways to play the game this month, ultimately opting for a hold.

“A hold is possible given the 5.6% inflation rate, which is the lowest we have seen in the past 12 months,” Dr Mardiasmo told Savings.com.au.

“It will be a welcome relief by many households, especially with this being winter and electricity charges due to increase as of the start of this month.

“Property price wise, everyone is on a hold and see pattern depending on the RBA, and we are already seeing some recoveries in certain markets - so holding will further result in more demand and possibly further price recovery.”

Despite no change in the cash rate this month, more rate hikes may be on the horizon.

ANZ Senior Economist Adelaide Timbrell said while the RBA paused rates this month, this likely won’t be the end of the tightening cycle. 

“Given the last two decisions were described by the RBA Board as ‘finely balanced,’ there is a chance the monthly CPI data could shift the RBA to a pause in July,” Ms Timbrell said.

“This would shift the timing of our forecast peak cash rate of 4.6% but not the level of peak.”

Dr Lowe kept the door open for a rate hike in August, citing ongoing concerns around inflation.

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve," 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 forecasts for inflation and the labour market."

Read More: When will the RBA lower interest rates?

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