Australia's central bank has become more confident about the outlook for economic growth, while a surprisingly subdued pace of inflation offered room for interest rates to be cut again if needed.
In its quarterly policy outlook, the Reserve Bank of Australia (RBA) forecast that underlying inflation would remain at the floor of its 2 to 3 percent target band for most of next year, a marked step down from its August prediction.
"The outlook for inflation may afford scope for further easing of policy should that be appropriate," the RBA said in its 72-page report.
Yet earlier this week the central bank skipped on a chance to cut at its November policy meeting, leading investors to lengthen the odds on a move in December as well.
"The Board judged the prospects for an improvement in economic conditions had firmed a little over recent months and that it was appropriate to leave the cash rate unchanged," the RBA said in its Friday report.