The Reserve Bank of Australia has raised the cash rate to 4.85% from 4.6% – its highest level since the global financial crisis in late 2008.It’s also the fifth interest rate increase this year, bringing the total increase to 1.25 percentage points since February.Asked if the RBA would lift rates again at coming meetings, RBA Governor Michele Bullock said, “I don’t know what the next move will be”. She noted the last couple of rate hikes “haven’t even started to flow through yet”. So it is probably a good point to just take stock for a minute and see what comes in, in terms of the data, to see if we’re travelling more or less in line with the forecasts.Bullock said the RBA was trying to balance curbing inflation with not tipping the country into a recession “if we can avoid it”. But she also acknowledged Australia’s sluggish economy:is going to make people feel like it’s a recession, because they feel poorer, their spending can’t grow very quickly because their incomes aren’t growing very quickly.Here’s what the latest rates move will mean for homeowners, jobs and the wider economy.What does it mean for mortgages?The latest increase will add about A$120 a month to repayments on a $731,000 mortgage – the average size of a new owner-occupier home loan in Australia . This is assuming lenders pass on the increase in full. In total, the five rate increases from this year will add about $600 a month to average repayments.The decision to lift rates wasn’t as simple as anticipated. The Reserve Bank board was split: six members voted in an increase, while three voted to keep the cash rate on hold at 4.60%.Bad news on inflation and jobsMost concerningly, the RBA has now substantially revised up its inflation forecasts. Inflation is now expected to remain elevated through much of 2027, returning to the top of the RBA’s 2–3% target range only in late 2027. This is nine months later than previously expected.In its decision statement, the RBA warned:inflation is now expected to remain above 3% for the coming year and there is an increasing risk that higher inflation expectations will become embedded.The central bank now also expects Australia’s unemployment rate will rise more than it previously expected, reaching 5.1% at the end of 2028“. It’s already at a five-year high of 4.7%.What forced the RBA’s handThe latest inflation figures, released last week, meant the bank’s decision was widely expected.Annual headline inflation rose from 4% in August to 4.3% in September. The RBA’s preferred measure of "underlying inflation” – also known as the “trimmed mean”, which trims away the sharpest price rises or falls – also increased from 3.5% to 3.6%.Both remain well above the RBA’s target of keeping inflation within 2–3%.What’s driving inflation beyond oil?Higher global oil prices, driven by the ongoing conflict in the Middle East, have contributed to inflation. Australians’ fuel prices rose 9.4% in September alone.But oil prices are not the whole story.Inflation in “non-tradable goods and services” – from construction and electricity, to medical treatments and restaurant meals, the prices of which are largely determined by domestic conditions – reached 4.5% in September. This suggests local inflation pressures remain significant.Rapid investment in artificial intelligence and data centres is also pushing up prices for technology-related goods.As Bullock stressed in her Tuesday media conference, higher interest rates cannot directly reduce global oil prices. But they can dampen household spending and business investment, easing domestic inflation pressures.They can also help prevent higher fuel and transport costs from spreading into broader prices and wages. Persistent inflation can prompt workers to demand higher wages, as well as businesses raising prices further.By raising rates again, the RBA aims to prevent inflation from becoming entrenched.Risks of going too hard on ratesAnother rate increase may be justified, but it will come at a cost.Higher mortgage repayments leave households with less money to spend. Higher borrowing costs discourage business investment and hiring.There are already signs of economic weakness. Household spending stalled in August. National housing prices fell 1.2% in October: their seventh consecutive monthly decline.The RBA has acknowledged the economy is slowing. Its latest forecasts anticipate weaker economic growth over the coming year, with higher interest rates and falling housing prices weighing on household consumption and housing investment.However, business investment is expected to remain relatively strong, partly driven by data centres.Interest rate changes affect the economy with a lag. This means the full impact of even the previous four rate increases is yet to be felt.The vast majority of Australian mortgage holders have variable rate loans. As higher repayments squeeze household budgets, reduced spending takes time to affect businesses, employment and inflation.This creates a difficult balancing act. If the RBA raises rates too slowly, inflation could remain above target for longer. But excessive rate hikes risk weakening growth and increasing unemployment.The RBA’s challenge is particularly difficult when inflation is partly driven by global supply shocks, which higher interest rates cannot directly address.Any more rate rises to go?Immediately after the rate rise, the financial market was tipping a 50-50 chance of a follow-up rate increase to more than 5%.With underlying inflation still above the RBA’s 2–3% target range, another rate rise remains possible at the bank’s upcoming December 7–8 meeting, or else subsequent meetings from February next year.But as the RBA governor also made clear, another rate rise is not inevitable. The RBA’s six–three split vote on raising rates suggests differing views within its board about the need for further increases.The cumulative effects of this year’s five rate increases are substantial. The RBA has signalled it may allow more time for them to work through the economy.For now, Australian borrowers should not expect interest rate relief anytime soon.Stella Huangfu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.