The Reserve Bank board has lifted the official cash rate from 3.6 per cent to 3.85 per cent in a surprise move just a week out from the federal budget, amid signs households are continuing to feel cost-of-living pressures.

Financial markets had said there was a 100 per cent chance of the RBA holding the cash rate steady, and most economists also believed the bank would pause.

The increase in the cash rate – now at its highest level in 11 years – comes a year after the central bank started raising it from the historic low of 0.1 per cent in a bid to tackle inflation.