Australia's central bank kept its cash rate at a record low of 0.1 percent on Tuesday and ended its A$275 billion ($194.40 billion) bond-buying campaign as expected but pushed back hard on market wagers for an early rate rise.

Wrapping up its February policy meeting, the Reserve Bank of Australia (RBA) emphasized that ceasing bond purchases did "not imply" a near-term increase in interest rates, and the board was still prepared to be patient.

"As the board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3 percent target range," RBA Governor Philip Lowe said in a brief statement. "While inflation has picked up, it is too early to conclude that it is sustainably within the target band."

The dovish message saw the local dollar slip 0.4 percent to $0.7036 in response. Lowe is set to give a speech on policy on Wednesday, and the bank will release a full set of economic forecasts on Friday.

Most analysts had expected an end to bond buying as such quantitative easing was no longer required, with unemployment falling to 13-year lows of 4.2 percent and core inflation surging to seven-year highs of 2.6 percent.

The latter was a major shock, given the RBA had thought core inflation would not reach 2.5 percent until the end of next year.

As a result, Lowe said core inflation was now forecast to rise to around 3.25 percent in coming quarters before easing to 2.75 percent over 2023. Unemployment was seen falling to below 4 percent later this year and to be around 3.75 percent at the end of next year.

Markets have long been wagering the RBA will ultimately blink on inflation and raise rates as early as May, with another four hikes to 1.25 percent priced in by December.

A May move would also be a political hot potato, given a national election is likely to be called for that month.

New Zealand's central bank has already hiked twice in the face of global inflationary pressures, and the U.S. Federal Reserve has flagged its first tightening for March.

The RBA, however, is still prepared to wait for wages to pick up after years of sub par outcomes. Lowe wants to see annual wage growth reach 3 percent or more, up from the current 2.2 percent and a pace not seen since 2013.

"Wages growth also remains modest, and it is likely to be some time yet before aggregate wages growth is at a rate consistent with inflation being sustainably at target," Lowe repeated on Tuesday.

A surge in coronavirus cases did hit consumer spending in January, but that followed a binge in the December quarter that points to considerable economic momentum.

The RBA still expected economic growth to run at a solid 4.5 percent this year before slowing to 2 percent over 2023.

"The Omicron outbreak has affected the economy, but it has not derailed the economic recovery," Lowe concluded.