The Reserve Bank has kept rates on hold for the 11th straight month after its board met today.

In a widely predicted decision, the RBA kept the official cash rate steady at 4.75 per cent, where it has sat since November last year.

The RBA indicated last month that it needed to gauge how the dark global economic outlook would affect inflationary pressures at home.

Its decision to leave the cash rate unchanged gives the bank more time to assess how the local economy is holding up, before - economists predict - a rate cut in the coming months.

With steep losses on markets overnight and the Australian dollar dipping to its lowest level in more than a year, economists say the RBA could move to ease monetary policy as soon as next month.

The Australian dollar fell to a fresh low of 94.76 US cents after the rates decision.

RBA governor Glenn Stevens says the board made the decision in light of the "very unsettled" nature of the global markets.

"Conditions in global financial markets have continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt and banking problems in Europe, and the outlook for global economic growth," he said in a statement.

"While temporary impediments that had contributed to a slowing in growth in some countries over recent months are lessening, recent data suggests a continuing period of soft economic conditions in both Europe and the United States.

"It will take more time for evidence of any effects of the recent European and US financial turbulence on economic activity in other regions to emerge."

Mr Stevens says investment into Australia's resources sector is picking up strongly and the country's terms of trade are "very high".

"While there remain good reasons to expect solid growth over the medium term, the indications are that the pace of near-term growth is unlikely to be as strong as earlier expected, due both to local and global factors, including the financial turmoil and related effects on business confidence," he said.

Risks intensify

ANZ's head of Australian economics, Katie Dean, says risks to the global economy have intensified.

"Those increasing downside risks are suggesting that interest rates here should actually be cut some time over the next couple of months," she said.

"If we were to see further big falls, for example, on our share market, further big falls in the Australian dollar, further squeezing of credit conditions globally, it would be likely that the RBA would come in and ease monetary policy to try to give the economy here some insulation to these offshore global pressures.

"For the RBA, it's really a matter of judging whether those global downside concerns are actually starting to have a negative impact on the Australian economy, and if they are having a negative impact, how big that impact will be."

Dollar down

US economist Nouriel Roubini, who predicted the global financial crisis in 2008, says drastic measures are needed to avert a crisis in the eurozone.

"We could have some worse than Lehman, much worse if one of the major economies in the eurozone has a disorderly collapse that is not contained," he said.

"The contagion and the global affects are going to be extreme and severe. And that's why this is a matter of concern not just for Europe but also the United States and for the global economy."

Just weeks ago the Australian dollar was trading above parity with its US counterpart, but now it has fallen to its lowest level since September last year.

Westpac senior currency strategist Sean Callow says the slide is being driven by fears over European debt.

"If there's a messy Greek default on its debt - which is certainly possible - then you could be talking somewhere well into the 80s [cents]," he said.

"The Aussie's going to remain under pressure until we see some better news on the global economy."