The Reserve Bank of Australia (RBA) has kept interest rates on hold at 3.75%. The surprise increase was not widely expected after financial markets predicted at 71% prospect that monetary policy would be tightened.

The market's attention will now turn to the March meeting of the RBA, where a number of economist believe the RBA could keep rates steady again to chart the effects of the rate rises so far on the Australian economy.

The move to keep rate unchanged follows an unprecedented three consecutive rate rises from the RBA. Glenn Stevens, RBA Governor, said it was too early to see the effect of the earlier rate hikes.

“With the risk of serious economic contraction in Australia having passed, the Board had moved at recent meetings to lessen the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” Glenn Stevens said.

“Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being,” Glenn Stevens added.