The Australian dollar fell 0.8% to $0.6380 and there-year bond futures rallied 5 ticks to 96.26, the highest since October. Swaps now imply there is a split chance of a rate cut in February, with a first easing more than fully priced in by April next year.

Wrapping up its December policy meeting, the Reserve Bank of Australia kept the cash rate unchanged at 4.35% where it has been all year. The statement omitted a previous line that the RBA Board was "not ruling anything in or out" as well as policy needing to remain restrictive.

Markets have heavily wagered on a steady outcome as RBA Governor Michele Bullock has repeatedly said that underlying inflation is still too high for rate cuts in the near-term, including just two weeks ago.

"Recent data on inflation and economic conditions are still consistent with these forecasts, and the Board is gaining some confidence that inflation is moving sustainably towards target," said the board in a statement.

The RBA has held its policy steady for over a year now, judging the current cash rate of 4.35% - up from 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

Some investors had bet the RBA could take a dovish turn after data showed economic growth in the third quarter was surprisingly weak, implying the central bank will have to cut its economic forecasts just one month after publishing them.

The expected rebound in consumer spending has yet to appear, with consumers largely holding onto the windfall from the government's tax cuts and paying off debt, according to bank research.

Anecdotal evidence pointed to robust sales over the Black Friday period, but a survey from the National Australia Bank released earlier in the day showed that business conditions slid to the lowest since late 2020 in November, suggesting the economy hasn't picked up momentum as expected this quarter.