The surprise slowdown in the pace of rate hikes will offer some relief for mortgage holders, with the central bank now likely to stick to smaller increases.
But some lenders have wasted no time passing on the 25 basis point interest rate hike, with Westpac the first of the big four to announce lifted rates for home loan and savings customers from October 18.
The Commonwealth Bank of Australia, National Australia Bank and the ANZ also confirmed on Tuesday they were lifting their rates by the same amount on October 14.
The 0.25 percentage point lift is the sixth rate hike in a row and brings the cash rate to 2.6 per cent.
The Reserve Bank has also signalled further interest rate increases, with inflation forecast to be far off its peak.
JP Morgan analyst Tom Kennedy said the bank was unlikely to revert to 50bp increments unless September quarter inflation figures, due out on October 26, were wildly higher than expected.
"In our view, inflation is still the main driver for near-term monetary policy with the upcoming consumer price index print in focus," Mr Kennedy said.
Business group Ai Group welcomed the shift to a slower pace of rate hikes.
"The lower increase of a quarter of a percentage point this month is a positive sign the Reserve Bank is conscious of the risks of going too far too fast," Ai Group head Innes Willox said.
For mortgage holders, the six rate rises will blow their repayments out by hundreds of dollars.
Compare the Market data shows monthly repayments will increase by $725 on the average $500,000 loan with 30 years left to go.
Rising interest rates and soaring inflation is eroding consumer confidence in the lead up to the festive season, with Compare the Market analysis showing 40 per cent of people plan to spend less this Christmas than in previous years.
Greens senator Nick McKim was disappointed to see another rate hike given the pain households were feeling.
"The RBA should be upfront about the limitations of monetary policy in tackling inflation that is being driven by supply shocks and corporate profiteering," Senator McKim said.
"(RBA governor Philip Lowe) has got to go, and he can take the rest of his business-friendly board with him."
The Greens will also leverage their balance of power in the Senate to push for the government to expand its housing fund.
The minor party wants the government to build more houses, freeze rents nationally and upgrade existing public housing.
© AAP 2022