The Reserve Bank of Australia left its main cash rate at a record low of 3% on Tuesday, but reiterated there was room to cut if needed given a benign outlook for inflation.
The bank said it's prudent to hold rates steady because the impact of past cuts had yet to be fully felt.
Governor Glenn Stevens noted that financial markets had improved and the economies of China and the United States had stabilised.
But he also said inflation is benign enought to cut interest rates if needed to support demand.
