Reserve Bank of Australia hikes interest rates for the fourth time in a row with an extraordinary 0.5% jump - Chief Idea

The Reserve Bank of Australia has raised the cash rate by half a percentage point with governor Philip Lowe hinting at further increases to tame the worst inflation in two decades.

The move takes the cash rate to a six-year high of 1.85 per cent - up from a three-year high of 1.35 per cent.

This would see someone paying off an average $600,000 mortgage cop a $169 increase in their monthly mortgage repayments.

The RBA has raised rates now in May, June, July and August marking the steepest pace of increases since 1994.

It has raised rates by 50 basis points at three straight meetings, the first time this has occurred since the Reserve Bank published a target cash rate in 1990.

In a statement, Dr Lowe said the RBA would struggle to get inflation back within the central bank's two to three per cent target any time soon, with Russia's war with Ukraine keeping petrol prices elevated.

'The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments,' he said.

The RBA chief strongly hinted at more rate rises to come.

'The board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path,' Dr Lowe said.

'The size and timing of future interest rate increases will be guided by the incoming data and the board's assessment of the outlook for inflation and the labor market.'

Inflation in the year to June surged by a two-decade high of 6.1 per cent.

Without the introduction of the GST, this was the steepest headline inflation, also known as the consumer price index, since 1990.

Treasury is expecting inflation to hit a 32-year high of 7.75 per cent later this year and remain outside the RBA target band until 2024.

Treasurer Jim Chalmers told Parliament the latest rate rise would be hard on families.

'Families will now have to make more hard decisions about how to balance the household budget in the face of other pressures like higher grocery prices and power prices and the costs of other essentials,' he said.

The rapid series of rate rises are occurring despite Dr Lowe repeatedly promising last year to keep the cash rate on hold at a record-low of 0.1 per cent until 2024 'at the earliest'.

Warwick McKibbin, who sat on the Reserve Bank board from 2001 to 2011, said the RBA should publish the opinions of individual board members, like the High Court does with judges, so borrowers had a better idea of decisions.

'The debates around the board should be completely open and transparent,' he told Daily Mail Australia. Treasurer Jim Chalmers told Parliament the latest rate rise would be hard on families.

'Families will now have to make more hard decisions about how to balance the household budget in the face of other pressures like higher grocery prices and power prices and the costs of other essentials,' he said.

The rapid series of rate rises are occurring despite Dr Lowe repeatedly promising last year to keep the cash rate on hold at a record-low of 0.1 per cent until 2024 'at the earliest'.

Warwick McKibbin, who sat on the Reserve Bank board from 2001 to 2011, said the RBA should publish the opinions of individual board members, like the High Court does with judges, so borrowers had a better idea of decisions.

'The debates around the board should be completely open and transparent,' he told Daily Mail Australia.

The big banks were all expecting a 0.5 percentage point rate rise and are likely to pass on the hikes to consumers. 

ANZ, Commonwealth Bank, Westpac and NAB are all expecting the RBA to follow up with another 50 basis point rate rise in September, taking the cash rate to a seven-year high of 2.35 per cent. 

ANZ is expecting the cash rate to hit 3.35 per cent by November while Westpac is forecasting that occurring by February. 

The Commonwealth Bank is predicting a 2.6 per cent cash rate by November while NAB is forecasting a 2.85 per cent cash rate by Melbourne Cup Day. Source: dailymail