AS IT HAPPENED: Reserve Bank hikes interest rates

Thanks for following along with our live coverage of today's interest rate decision.

That's all from us today. Here's what you need to know about today's developments:

The RBA has increased the cash rate for the third consecutive time, up to 4.35 per cent.

This will add between $227 to $453 to the average monthly mortage repayments, according to Canstar.

RBA Governor Michele Bullock attributed the decision to rising inflation and the war in the Middle East.

"We are all feeling poorer," she said at her 3.30pm press conference explaining the decision.

Treasurer Jim Chalmers said Australians were paying the price for the war, while shadow treasurer Tim Wilson blamed government spending for the hike.

So far, only one bank – Macquarie – has passed on the rate rise to customers. We have yet to hear from the big four.

Thanks for reading our rolling coverage. We'll catch you next time.

If one thing is for certain, it's that the RBA is facing uncertainty.

The bank's statement on its cash rate decision today mentions uncertainty 48 times throughout the 74-page document.

Clearly, the war in the Middle East has thrown a spanner in their forecasts and the Australian economy.

Going back to the RBA's Statement on Monetary Policy, the RBA has laid out assumptions about the direction of the cash rate for the rest of this year.

These assumptions are not their own but ones it uses in its forecasts based financial market pricing and the daily exchange rate.

Under the assumption, the cash rate is expected to hit 4.7 per cent by December.

It also sees the cash rate dip slightly to 4.6 per cent in June 2027 before rising to 4.7 per cent again in December 2027 and June 2028.

The RBA will now "see what happens" after the rate hike, with a rate hold on the table at the next meeting in June, but it's clearly not afraid to do what it takes to bring inflation down to the 2-3 per cent target.

Bullock said the board discussed all the adverse outcomes of a rate hike before the decision was announced.

"The outcome of that discussion was that it's uncertain, we don't know," she said.

"One reason for deciding to increase interest rates to give ourselves space now to sit and see what happens, whether that baseline turns out or it's an adverse scenario, was part of the thinking of increase now and then give yourself space."

Bullock has admitted that it is "quite possible" there wouldn't have been a third rate hike today if there was no war in the Middle East.

"Would we have had to have three increases? I don't know the answer to that, but what I can say is that this oil shock, driven by what's going on in the Middle East, has complicated things immensely," she said.

"It has made the trade-off for us much worse for any given inflation rate now.

"That means lower growth, it means higher unemployment.

"So it's quite possible that we wouldn't have had to increase rates a third time if the shock hadn't occurred."

Bullock said the war has "certainly" made the trade-off worse.

Bullock said everyone is feeling the pinch due to the war in Iran.

"Australians are poorer because of this shock to oil prices and energy prices and all the other commodity prices that are being impacted," she said.

"So we are poorer, and there is no way out of that. The trade-off is much worse."

Bullock says her board feels the initial demand and inflation conditions it was trying to handle before the war started have been addressed.

She said the board now has "space" to consider the risk of inflation and the risk of a prolonged war.

Straight out of the gate, Bullock has said the third rate hike this year was "necessary" to fight inflation.

"Inflation in Australia was already too high before the recent conflict in the Middle East began," she said.

"The most recent data have confirmed that some of the increase in inflation was being generated by economy-wide capacity pressures, including ongoing tightness in the labour market.

"Developments in the Middle East remain highly uncertain but, under a wide range of possible scenarios, the conflict adds to global and domestic inflation."

RBA Governor Michele Bullock is now speaking about the board's decision to increase the cash rate.

The RBA has published its Statement on Monetary Policy today, which has outlined how the conflict in the Middle East is causing worse financial conditions in Australia.

"The conflict has also had a significant impact on the production and trade of other commodities that are key inputs into industries such as agriculture and manufacturing," it wrote.

"These disruptions will persist for some time even after the conflict ends."

The RBA noted there is uncertainty around how long the conflict will last, but warned a prolonged war could lead to a higher unemployment rate, reduced growth in household disposable incomes and reduced business investment spending.