The Reserve Bank has raised its cash rate target by 0.25 of a percentage point, opting against a return to steeper interest rate hikes.
The latest move takes the RBA's cash rate target to 2.85 per cent, up from a record low of 0.1 per cent at the start of May this year, and the highest it has been since May 2013.
NAB was the first major bank to announce its response to the RBA's decision, lifting rates on variable mortgages by 0.25 of a percentage point from November 11.
RateCity figures show a borrower owing $750,000 on a 25-year mortgage will soon be paying an extra $112 a month once the latest rate rise is passed on by the banks.
That borrower is now facing an $1,140 increase in their monthly repayments since rates started rising in May.
However, the post-meeting statement from RBA governor Philip Lowe warned borrowers that they should brace for more rate rises.
"The board expects to increase interest rates further over the period ahead," Mr Lowe warned.
"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."
Just ahead of the meeting, financial markets had priced in a slightly greater than 70 per cent chance of a rate move that size, with less than a 30 per cent chance of a bigger 0.5 of a percentage point hike.
Forecasts of a 0.5-percentage-point interest rate increase had grown stronger after official inflation figures from the Australian Bureau of Statistics showed prices had jumped 7.3 per cent over the year to September.
Biggest cost of living increasesThat was above economist forecasts, and included stronger-than-expected increases in the Reserve Bank's preferred "core" measures of inflation, which came in at 6.1 and 5 per cent, well above the RBA's 2-3 per cent target.
On the back of those figures, the Reserve Bank now expects headline inflation to reach around 8 per cent by the end of this year, before gradually falling back to a little above 3 per cent in 2024.
Marcel Thieliant from Capital Economics said that backs his view that the Reserve Bank still has another four 0.25-percentage-point rises ahead over the next six months or so.
However, he also believes the economy and inflation will slow much more sharply next year than the RBA is forecasting.
"The upshot is that we still see a good chance that policy will be loosened before the end of next year," he argued.
"We have pencilled in a total of 75 basis points of rate cuts by mid-2024, taking the cash rate to 3.1 per cent.
"The analyst consensus is that the bank will only start to cut interest rates by mid-2024."
