The Reserve Bank has lifted interest rates for the third time in as many months as it seeks to combat rising inflation.

At its monthly board meeting on Tuesday, the RBA hiked the official cash rate target by half a percentage point to 1.35 per cent – its highest level since May 2019.

If passed on in full, the rate hike will add $144 to the monthly repayments on a typical $500,000 mortgage.

Reserve Bank governor Philip Lowe said the bank was hiking rates to tackle inflation that was being pushed up by a mixture of domestic and international factors.

He said the bank would continue to raise rates this year as the Australian economy no longer needed the emergency-level support that the central bank had provided it during the pandemic, with the unemployment rate at a near-record low of 3.9 per cent.

“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic,” Dr Lowe said.

“The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed.”

Economists had widely expected the RBA to raise the cash rate by half a percentage point on Tuesday.

The central bank has previously made it clear that it will raise rates aggressively to fight rapidly rising prices.

In a rare interview with the ABC’s 7.30 in June, Dr Lowe said the bank expects annual inflation to reach 7 per cent by the end of the year – well above its target range of 2-3 per cent.

“We’ll do what’s necessary to get inflation back to 2-3 per cent,” Dr Lowe told 7.30.

“I think by the end of the year inflation will get too close to 7 per cent, and we need to chart a course to bring it back down.”

The rate hike will heap pressure on household budgets already straining under the weight of rising electricity bills, higher fuel costs and surging grocery prices.

Energy retailers increased their default market offers (DMOs) by up to 10.7 per cent on July 1.

Set by regulators, the DMOs are the highest prices that retailers can charge in each state and are paid by more than 700,000 Australians. They also flow through to broader energy prices.

Meanwhile, data from the Australian Institute of Petroleum shows the average national petrol price was up to $2.11 cents a litre last week, while supermarket bosses have hinted at further price increases later this year.