The Reserve Bank has raised the cash rate by 25 basis points to 3.85 per cent, the first rate hike in over two years.

The decision to hike the cash rate comes after inflation increased in the quarter to December, rising from 3.2 per cent to 3.8 per cent.

It was heavily speculated in the lead-up to Tuesday’s announcement that a rate hike was coming.

Chief investment officer at the Motley Fool Scott Philips says inflation in the last six months has been too high.

Listen to more highlights from Afternoons below:

Image: iStock