The Reserve Bank of Australia has lifted the cash rate again, tightening monetary policy as rising energy prices and persistent inflation keep pressure on the economy.

As forecast by the big four banks the Reserve Bank of Australia (RBA) raised the official cash rate 25 basis points to 4.10 per cent.

The move comes amid growing concerns the conflict in the Middle East could push oil prices higher and drive a fresh wave of inflation. Before the decision, economists were divided. A Finder RBA Cash Rate Survey found 38 per cent of experts expected a hike, while 62 per cent predicted the bank would hold.

Scott Kuru from Freedom Property Investors said, "It's clear the RBA is worried about inflation, but they don't seem to have a great handle on reading the economic tea leaves (after all, that's their job) in a timely fashion. They waited far too long to start raising rates in 2022, and on reflection, their decision to lower the cash rate for a third time in August last year was probably premature."

Dr Andrew Wilson from My Housing Market says the latest economic signals point to further tightening. "The latest RBA narrative indicates higher interest rates in the face of high and rising inflation - with the oil wild card now in play," Dr Wilson said.

Other economists warn inflation expectations could become entrenched if the central bank fails to act. Matthew Greenwood-Nimmo from the University of Melbourne says the risk of rising inflation expectations is a major concern. "There are several reasons, including the risk of inflation expectations drifting upward the longer that inflation is above target, and the additional inflationary pressure that is likely to come from energy market disruptions associated with the conflict in the Middle East," he said.

Evgenia Dechter from UNSW says stronger-than-expected economic data may also have influenced the decision. "Inflation is still above target and GDP growth has been stronger than expected. With rising oil prices and global uncertainty, the RBA may consider a further rate increase," Ms Dechter said.

The rate rise will immediately add pressure to already stretched household budgets. According to Finder, a 25 basis point increase will push repayments on the average Australian mortgage of $736,259 up by about $2,805 per year compared to what borrowers were paying at the start of the year. For homeowners with a $1 million mortgage, the increase would equate to about $3,810 more in annual interest costs.

BresicWhitney's Will Gossesaid, "The RBA's decision to raise rates again today will deepen a slowdown that was already underway - sales volumes are tracking lower than this time last year, transactions are taking more care and patience to bring together, and the risk is that this caution extends through Easter and into the back half of autumn, typically one of the most active periods for buying and selling.

"Importantly, this isn't a supply story. Listing levels remain healthy. The change has been in buyer decision-making since February's rise. The shift in the rate narrative has been quite rapid, and it's understandable that consumers are taking time to adjust to what further increases may mean for them.

"The buyers who remain active have greater choice and are less inclined to stretch themselves. One buyer can still be enough to create a transaction, but sellers need to recognise that buyer may be the market.

"What we know about Sydney is that it remains one of the world's most desirable housing markets. Periods of adjustment like this are a normal part of any cycle - they create the conditions for recalibration, and when buyers and sellers find that common ground again, the market moves. The fundamentals here haven't changed."

Finder's Graham Cooke says borrowers should review their loan immediately. "If you don't know what interest rate you're paying on your mortgage, or haven't looked to see if you can get a better deal, you're probably paying too much," Cooke said.

"The difference between the average market rate and the best available is significant."

"Negotiating even a small discount with your lender, or refinancing to a better deal, could effectively cancel out the impact of the predicted rise."

While the latest move adds pressure on borrowers, economists say the RBA may not be finished yet. Finder's survey shows 84 per cent of experts do not expect any rate cuts over the next year, signalling Australians may face a prolonged period of higher interest rates.

This article was originally published from view.com.au and appears with permission.

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Mortgage holders feel the pain after latest RBA cash rate hike