The inflation fight is not over but the Reserve Bank of Australia is growing increasingly confident the battle is shifting in its favour.

After leaving interest rates on hold in December, as universally expected, economists observed a notable shift in the central bank’s language that could open the door to a February cut.

For 13 months, interest rates have been held at the elevated level of 4.35 per cent, aimed at slowing the economy and taming inflation.

While working to curb price pressures, high interest rates have pushed up repayments for mortgage-holders, setting the scene for a federal election fought over economic management.

In a sign interest rate relief is edging closer, the RBA said it was “gaining some confidence that inflation is moving sustainably towards target”.

Commonwealth Bank economist Gareth Aird highlighted the removal of the line “the board is not ruling anything in or out” from its Tuesday statement as a sign another rate hike is unlikely. 

“Put simply, the statement read like the board is now confident that the next move in interest rates will be down,” he wrote in a note. 

The big bank is still predicting a February cut and Mr Aird said Tuesday’s statement supported the call.

All eyes will be on the underlying price measures in the December quarter consumer price index, due in late January.

The all-important trimmed mean underlying measure is sitting at 3.5 per cent, above target, and the RBA does not expect it to be back in the two-three per cent band until 2026. 

Furthermore, the RBA in its statement reiterated underlying inflation remains “too high” and it wants to see further progress on the indicator.

By Poppy Johnston in Canberra