The Reserve Bank has increased interest rates for the first time in more than 11 years, with a 25-basis-point hike taking the cash rate target to 0.35 per cent.

If passed on in full by banks, the rate rise will add more than $50 a month to repayments on a $500,000 mortgage, and double that on a million-dollar loan.

The move came as little surprise to financial traders, who had priced in around a two-thirds probability of the RBA raising rates this month.

Reserve Bank governor Philip Lowe said the combination of recent very high inflation numbers and evidence that workers were starting to get bigger wage increases as a result of a low 4 per cent unemployment rate meant that the time was right for "normalising" interest rates away from emergency lows.

"The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time," he noted in his post-meeting statement.

Mr Lowe will hold a press conference to answer questions about the decision at 4pm AEST.

Markets are pricing in the virtual certainty of another rise in June, taking the cash rate target to at least 0.5 per cent.

More to come.