This is the first time since the RBA's initial hike in May that rates have risen less than 0.5 of a percentage point.

RBA governor Philip Lowe said the bank's board decided it was time to slow down a little and take stock.

"The cash rate has been increased substantially in a short period of time," he noted in his post-meeting statement.

"Reflecting this, the board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia."

The move takes the benchmark rate to 2.6 per cent, although that is still the highest official interest rate in Australia since July 2013.

Further rate rises expected:

The increase will add $74 a month to repayments on a 25-year $500,000 mortgage, and double that for borrowers with a million dollar home loan.

Repayments on a half a million dollar 25-year loan have now risen by $687 a month since the first rate hike in May, assuming all the rate rises are passed through in full.

However, any borrowers hoping that the smaller rate rise would signal an end to increases are likely to be disappointed.

"The board expects to increase interest rates further over the period ahead," Mr Lowe emphasised.

"The size and timing of future interest rate increases will continue to be determined by the 

incoming data and the board's assessment of the outlook for inflation and the labour market.

"The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that."

The Commonwealth Bank's head of Australian economics Gareth Aird was one of the few analysts tipping a smaller rate rise today, and he expects only one more ahead next month.

"We expect a further 25-basis-point rate rise at the November board meeting," he noted after today's decision.

"From that point our central scenario has the RBA on hold as they the give themselves time to assess the lagged impact of rate rises on the Australian economy .

"The risk to our call sits with a further 25-basis-point rate rise at the December board meeting, which would take the cash rate to 3.10 per cent."

Westpac is forecasting the highest interest rate peak of the major banks, at 3.6% by February, which financial comparison firm Canstar said would see repayments on a 30-year $500,000 loan go up more than $1,000 a month in less than a year.

Original Story By | Michael Janda