The Reserve Bank of Australia surprised markets Tuesday by holding its policy rate unchanged at 3.75% after a string of increases at its previous three meetings. The decision is considered being a pause in the tightening cycle, with the bank taking a breather to gauge the impact of the 75 basis points in total tightening from October to December of 2009

After a spate of better-than-expected economic data in recent weeks, analysts had widely expected a rate increase of 25 basis points to 4.0%, according to surveys by Dow Jones Newswires, Reuters and others.

RBA Gov. Glenn Stevens said in a statement Tuesday that consumer inflation “has risen somewhat recently as temporary factors that had been holding it down are now abating,” but added that the level of inflation this year is expected to be consistent with the RBA’s target.

Stevens’ statement also mentioned China’s recent steps to withdraw stimulus. Last month, China raised banks’ reserve-requirement ratio, and also reportedly cracked down on new lending.

The Australian economy is highly sensitive to China’s demand for commodities, so a monetary or macroeconomic move by China typically has an eventual impact on Australia.

Australia’s consumer prices in the October-December quarter rose 0.5% from the prior period, the Australian Bureau of Statistics said last week. The increase topped expectations among economists for a 0.4% gain.

The Australian Bureau of Statistics also said last month that the nation’s jobless rate eased in December, with the economy adding more than three times as many jobs as economists had forecast.

The Australia dollar fell immediately following the decision. It was trading at 87.93 U.S. cents, down from 89.22 U.S. cents before the announcement, and down 1.3% from the previous session