This marks a 50 basis points increase from last month, at which time there was also a 50 bp increase.

In a statement, RBA governor Philip Low said the Board of the RBA places a high priority on the return of inflation to the 2–3 per cent range over time, while keeping the economy on an even keel.

"The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments. The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine and the COVID containment measures in China," he said.

"Inflation in Australia is the highest it has been since the early 1990s. In headline terms, inflation was 6.1 per cent over the year to the June quarter; in underlying terms it was 4.9 per cent. Global factors explain much of the increase in inflation, but domestic factors are also playing a role. There are widespread upward pressures on prices from strong demand, a tight labour market and capacity constraints in some sectors of the economy. The floods this year are also affecting some prices."

Inflation is expected to peak later this year and then decline back towards the 2–3 per cent range, Mr Lowe continued.

"The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, the stabilisation of commodity prices and the impact of rising interest rates. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank's central forecast is for CPI inflation to be around 7.75 per cent over 2022, a little above four per cent over 2023 and around three per cent over 2024," he outlined.

"The Australian economy is expected to continue to grow strongly this year, with the pace of growth then slowing. Employment is growing strongly, consumer spending has been resilient and an upswing in business investment is underway. National income is also being boosted by a rise in the terms of trade, which are at a record high. The Bank's central forecast is for GDP growth of 3.25 per cent over 2022 and 1.75 per cent in each of the following two years."

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Reflecting on the decision, Legal Home Loans director of sales Cullen Haynes said that today’s (2 August) cash rate increase is “another substantial jump”, and that LHL expects most banks will pass it on to borrowers within the week.

“Anyone concerned about rising mortgage repayments and impact on household budgets should speak to their bank or broker regarding fixed rate options if not done so already,” he advised.

“Mortgage holders locked into historically low fixed rates should be aware that there will be a significant increase in repayment when their fixed term ends which they may want to start budgeting ahead of time for.”

For those seeking new loans, Mr Haynes went on, borrowing capacity will be decreased as banks factor a higher servicing rate into household affordability when assessing home loan applications.

“It is now more important than ever to gauge borrowing power as well as obtain pre-approval to confirm a purchasing budget before looking at properties,” he stressed.

“We expect that interest rates will continue to rise this year, and borrowers should also take this into consideration.”

Treasurer Jim Chalmers said that the latest rise is more difficult news for Australians with a mortgage.

"Australians knew this was coming, but it doesn’t make it any easier to handle. Loan repayments will bite deeper into family budgets already feeling the sting of high grocery and energy costs. Average homeowners owing $330,000 will now have to find around $90 more a month and that’s on top of the $220 in repayments since before the election," he said.

"For Australians with a $500,000 mortgage, the extra repayments will be around $140 a month in addition to the $335 they’ve had to pay since May. We have been up‑front about the growing challenges facing our economy – some home‑grown, others from around the world."

"The government changed hands at a time of rising inflation and interest rates alongside falling real wages. Australians know their new government didn’t make this mess, but we take responsibility for cleaning it up," the Treasurer proclaimed.