AS IT HAPPENED: Divided Reserve Bank delivers the news that made Australian hearts sink

With Michele Bullock's press conference now wrapped up, we're going to finish up our live rolling coverage of today's interest rate rise.

Here's what happened:

As largely expected, the RBA's monetary policy board decided to increase the cash rate to 4.10 per cent, with inflation still far too high and the oil price spike caused by the war in the Middle East exacerbating things.

The decision was a line-ball call – of the nine board members, five voted for a hike, and the other four for a hold.

However, Bullock said there was unanimous agreement that an increase was warranted, and that the disagreement was only about the timing of said increase.

The governor added that while the RBA doesn't want to cause a recession, she didn't rule it out if that's what's required to bring inflation under control for good.

NAB was the first of the big four banks to pass on the hike, with announcements from other major lenders expected soon.

NAB has become the first of the big four banks to pass on the RBA's rate rise to its borrowers.

Its variable home loan rates will rise by 0.25 percentage points, starting next Friday, March 25.

As is habit for the major banks, its announcement makes no mention of savings rates, which should also rise with the official cash rate.

The final question to Bullock is about the board's split decision.

She says it's a good thing, because it shows the decision-makers are considering a wide range of views before settling on a course of action.

"Ultimately, economics… this is not a science, this is difficult stuff," she says.

"Reasonable people can hold different views very reasonably.

"The meeting today, with its split decision and the process it went through, was an excellent demonstration of how that can be very positive."

That's all from the governor.

Bullock is asked what today's decision means for the RBA's next interest rate meeting, scheduled for early May.

Regular readers will know the governor is always tight-lipped about where rates will go in the future, lest she give anyone a misleading forecast, and today is no different.

"It doesn't say anything about the forward path," she says.

"We can't do anything about the inflation rate that's going to pop out in the next few quarters if the current oil price is sustained," she adds.

"That will just be what it will be.

"But what we might be able to do and what we're hoping to do is bring the excess demand down so that, as that washes through, we'll end up with less pressure on the second-round effects…

"Now what does it mean (for future decisions)? I don't know. It's going to depend very much on what else happens."

Bullock is asked whether the RBA would be prepared to put Australia through a recession if that's what's required to finally get inflation under control.

She replies that the bank doesn't want that, but won't rule it out.

"The best contribution we can make to full employment and in fact to things like investment and productivity and so on, is to have low and stable inflation," she says.

"So we do need to keep our eye focused on that ball.

"We don't want to have a recession, but if it's hard to get inflation down, then, you know, we're going to have to deal with that possibility."

While most Australians would only really be familiar with the direct impact higher interest rates have on lowering inflation – that is, increasing borrowers' repayments and therefore reducing their spare cash, and therefore demand; and also encouraging people to save – Bullock says there's another factor at play.

"The third and quite important channel is the exchange rate," she says.

"As the exchange rate rises, it puts downward pressure on inflation by making imports cheaper, people tend to buy imported goods… so it puts less pressure on the domestic side of things."

Speaking of, the Aussie dollar has risen about a tenth of a cent since the rate hike was announced.

Bullock says she understands many households will struggle with today's hike combining with higher oil prices and increasing inflation to create a hip-pocket triple-whammy.

"I understand that this is tough news for people with mortgages, I understand that," she says.

"The fact that petrol prices are up so substantially as well is just another problem."

However, she says things would get far worse for far longer if interest rates had remained on hold.

"The board's challenge is that if we don't raise interest rates, and we're going to see second-round effects coming from petrol prices and fuel prices, they'll get into supply chains, it's going to go into business's costs and so on.

"If we don't bring the excess demand down, then businesses are just going to build that into their costs, so it's going to be even worse for everyone."

Bullock says the board had a "robust" discussion before voting to hike – which sounds like corporate speak for things getting about as heated as they ever do around the boardroom table.

However, she wants to make it clear everyone agreed another rate increase was required, and disagreement was only around whether to pull the trigger now or later.

"The direction wasn't the issue," she says.

Bullock is speaking now.

She says today's rate hike wasn't caused by increased oil prices, pointing out local inflation is too high.

"Higher petrol prices will add to inflation, but they're not the reason for today's decision," she says.

"Inflation was already too high."

Michele Bullock is minutes away from addressing the media about today's rate hike.

You can watch that press conference in the video player above.