The Reserve Bank of Australia surprised the market on Tuesday by keeping the official cash rate at 4.5 per cent and granting borrowers a reprieve.

Analysts had expected an increase of 25 basis points given the nation's solid trade surplus, a 20-month high in job advertisements and unemployment level of just 5.1 per cent.

The speculation of a rate hike had, in fact, sent the domestic dollar to a near two-year high, with the Aussie trading just below 97 US cents in intraday trade.

RBA governor Glenn Stevens said "The current stance of monetary policy is delivering interest rates to borrowers close to their average of the past decade. The Board regards this as appropriate for the time being.

However, the reprieve for borrowers may be short-lived, with the large commercial banks announcing their plans to pass on rising funding costs in the form of higher interest rates, and the RBA not discarding the prospect of a rate rise anytime soon.

"If economic conditions evolve as the Board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target," Mr Stevens said.

The central bank also last month gave a strong indication to counter inflation pressures from the mining boom.

Today's announcement marks the fifth consecutive month the RBA kept the cash rate on hold.