The Reserve Bank of Australia (RBA) raised its cash rate from 3.6% to 3.85% on Tuesday. The move aims to cool down an economy described as running "too hot" by the central bank. However, many Australians say they are struggling and cutting costs, making it hard to see the economy as strong. RBA Governor Michele Bullock told reporters, "I know this is not the news that Australians with mortgages want to hear, but it is the right thing for the economy." Bullock described this rate hike as an "adjustment," not the start of a new rate-hiking cycle. Yet she did not rule out further hikes, especially with inflation expected to peak at 4.2% by mid-year. She explained the central bank was surprised by the economy's strong performance in late 2025, which continued into 2026. The problem, Bullock said, is that even small increases in demand lead to higher inflation because the economy can’t keep up. This has pushed inflation up again since late last year. Despite low unemployment, many Australians feel worse off as prices have risen 20% to 25% over recent years. "People see that every time they walk into a supermarket, or they go to the doctor," Bullock said. She also noted that the burden of higher interest rates is uneven. People with mortgages on lower incomes feel it most, while others have been saving the money they gained when rates were low. "The interest rate is a very blunt instrument," Bullock added, highlighting the difficulty of balancing the economy while many households struggle. This rate increase intends to slow spending, investment, and building to bring inflation under control. But for many Australians already feeling financial pressure, today's announcement is a tough pill to swallow.