Borrowers have been given another reprieve after the Reserve Bank of Australia (RBA) decided to keep the cash rate steady at 4.75 per cent.
The decision was expected, with all but one of the 13 economists surveyed last week by AAP predicting the central bank would keep rates on hold.
The central bank last raised the cash rate by 25 basis points in November 2010.
RBA governor Glenn Stevens said on Tuesday recent economic data showed the effects of production losses due to the floods and Cyclone Yasi.
"The affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring," Mr Stevens said in a statement accompanying the decision.
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As the temporary price shocks dissipate over the coming quarters, consumer price index (CPI) inflation will be close to the bank's target over the year ahead, he said.
"Looking through these short-term movements, however, the recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course.
"While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected."
HSBC chief economist Paul Bloxham said it was clear the RBA was less comfortable with the inflationary outlook than they were last month.
They are noting that inflation has troughed and you get a sense from the statement that the tightening bias that they have is stronger now than it was last month," he said.
He said it was also clear that they were in no rush to raise the cash rate, partly due to the high exchange rate.
Mr Bloxham expected the central bank to raise the cash rate to five per cent either in July or August.
National Australia Bank (NAB) senior economist Spiros Papadopoulos agreed that there was some change to the way the RBA talked about inflation in their statement.
"They are now seeing inflation rising above three per cent over the next 12 months," he said.
"It confirms to us that if we see high inflation figures coming through, we're in line for another rate increase later this year."
Mr Papadopoulos said NAB was still expecting the RBA to next raise the cash rate in August.
Meanwhile, ICAP senior economist Adam Carr said the central bank hadn't come to grips with the recent economic data, which he believed suggested inflation was picking up.
"It's as if they hadn't seen the last CPI (consumer price index) numbers and they haven't quite processed the recent data flow," Mr Carr said.
He expected the central bank to raise the cash rate in June, after digesting recent data.
He said the statement accompanying the RBA's decision revealed the bank had been forced to change its mind on the domestic economy.
"The labour market has been strong - they're playing that down. CPI has spiked up - they're playing that down," Mr Carr said.
"This is reflecting an organisation which has been caught unawares. They've misread the economy and now they're just processing that."
