Interest rates have been paused for the first time in almost a year as the Reserve Bank ends its record breaking streak of hikes amid signs the economy has started slowing.

At a meeting on Tuesday afternoon the RBA board held its cash rate target at a decade high 3.6 per cent for April, forgoing another 0.25 percentage point rise that many economists had expected.

Its the first reprieve for millions of Australian mortgage payers since interest rates began rising in May 2022, with monthly repayments on a 25-year, $500,000 loan having already risen by about $983, according to figures published by RateCIty.

RBA Governor Philip Lowe, who has recently defended himself against political criticism about the rate squeeze, now says the time is right to hit pause on rates.

“The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” he said in a statement on Tuesday.

“The Board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.”

The rate pause comes after a raft of economic data in late-2022 and early-2023 showing signs Australia’s economy is slowing faster than experts had anticipated.

Consumer spending, in particular, has weakened markedly in recent months as the cost of living and 10-straight rate hikes have eaten into household budgets.

Headline inflation has also moderated from its December peak in early 2023, at least according to a new set of official monthly data being published by the ABS.

The pace of price rises is, however, still far higher than RBA targets, with Dr Lowe on Tuesday suggesting further rate hikes may still be needed to cool inflation in the next two years – a crucial timeline outlined in recent central bank forecasts.

“The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target,” Dr Lowe said.

“The decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty.

“In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”

The RBA, which wants inflation to sit between 2 to 3 per cent over the medium term, predicts that the headline Consumer Price Index (CPI) will have fallen to 3 per cent annually by July 2025.

But the upcoming release of a broad ranging review into the RBA, the results of which are set to be published by Treasurer Jim Chalmers in April, could change how the central bank approaches its inflation target.