Interest rates galloped ahead on Melbourne Cup Day when mortgage holders were dealt another 25 basis point rise and warned there is more pain to come.

As expected, the Reserve Bank of Australia moved the cash rate up to 2.75 per cent.

Governor Philip Lowe said rates must keep increasing to help slay the inflation dragon.

"As is the case in most countries, inflation in Australia is too high," Mr Lowe said in his statement accompanying the rate announcement.

Over the year to September, inflation rose to 7.3 per cent, the highest it has been in more than three decades. The RBA expects inflation to peak at around 8 per cent later this year before starting to ease.

The RBA hopes it will be a little above 3 per cent over 2024.

Mr Lowe said global factors explain much of the high inflation, but strong domestic demand "relative to the ability of the economy to meet that demand is also playing a role".

KR Peters director Peter Nicolls said he fears the RBA will "stuff up" monetary policy by rising rates too high, too fast.

"The RBA wants to see inflation at 2-3 per cent, which I don't think is achievable in the current situation. Four per cent is a more realistic inflation target," Mr Nicolls said.

"The RBA is not waiting to see what effect these rates rises are having. If I was a punter I would say they are going to stuff it up and go too high, too fast."

The increasing cost of borrowing money is already slowing building approvals which fell 5.8 per cent in September according to Australian Bureau of Statistics data.

The fall in approvals was driven by private sector houses, which declined 7.8 per cent. In Victoria the decline was less severe than the national average at -4.7 per cent.

Mr Lowe said the RBA board "expects to increase interest rates further over the period ahead".

"The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that."