The hike of 25 basis points lifts the cash rate to 2.85 per cent, its highest in nine years and the seventh increase this year.

The bank also racheted up its expectations for inflation which it said would reach 8 per cent later this year from its current 7.3 per cent.

Governor Philip Lowe said the RBA was resolute in its determination to return inflation to the target level of between 2 and 3 per cent and “will do what is necessary to achieve that”.

“The board expects to increase interest rates further over the period ahead,” Lowe said.

However, it could be 2024 before it gets inflation back to its target range, according to some economists.

Mortgages were now expected to jump as lenders passed on the increase in the cash rate and the NAB was the first into the market with a full .25 per cent increase on its variable home loan rate.

According to Canstar, the extra 0.25 per cent would add an extra $79 a month to repayments on a $500,000 mortgage and a total of $809 since April.

However, many economists expect another hike in December and a reprieve in January because the board doesn’t meet until February. The increases would then continue until May under some forecasts.

The bank’s central forecast for GDP growth has been revised down a little, with growth of around 3 per cent expected this year and 1.5 per cent in 2023 and 2024, but the RBA has also indicated it would act quickly if it saw signs of wage breakout and the ANZ Bank said this was likely to be a critical issue in the year ahead.

“Given the importance of avoiding a wage price spiral, the board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead,” the RBA said.

Depending on which economist you believe, there is either one interest rate hike left in the current cycle or another five. The Commonwealth Bank is the most optimistic and also believes there will be two interest rate cuts to come in 2023.

The problem for the RBA is that interest rate increases take six months or more to filter through the economy so any meaningful impact may still be some time away.

Betashares chief economist David Bassanese predicted three more .25 per cent rate hikes with the peak in the current cycle of 3.6 per cent.

The ANZ has predicted a cash rate ceiling of 3.85 per cent, a full 100 basis points above the current level. It expects that to be reached in May.

Ray White economist Nerida Connisbee said it was too early to tell if Australia would avoid a recession, “but if China bounces back, migration levels push upwards and our education sector starts to return to pre-pandemic conditions, we may once again be a global outlier”.