If financial markets are to be believed, by the end of this year it will have added a total of $800 per month - and, by the end of next year, a total approaching $1000 per month.

Those figures are for variable mortgages, but home owners on fixed rates won't escape them long. Those rates are typically fixed for up to three years.

Many of the fixed-rate mortgages were taken out during COVID at annual rates as low as 2 per cent. When those fixed rates end (and many will end in the next year or so) those home owners will find themselves paying 5 per cent or 6 per cent per year, shelling out as much as $3000 per month instead of $2000.

Unless financial markets are wrong. The good news is, I think they are.

The pricing of deals on the futures market factors in an increase in the Reserve Bank's cash rate from 0.10 per cent to 3.5 per cent by June next year, enough to push up the standard variable mortgage rate from around 2.25 per cent to 5.65 per cent.

One reason for suspecting it won't happen is that many home owners simply couldn't afford the extra $1000 per month. Most of us don't have that much cash lying around.

US President Richard Nixon had an economic adviser by the name of Herbert Stein with an uncommonly developed sense of common sense. In his later years, he wrote an advice column for Slate magazine.

To a reader wanting a cure for unrequited love, he wrote that the best solution was "requited love". To a reader concerned about her inability to make small talk, he wrote that what people want most is a "good listener".

In economics, Stein is best known for Stein's Law, which says: "If something cannot go on forever, it will stop."

Mortgage rates can't keep climbing to the point where home owners pay an extra $1000 per month.

For new home owners, it's worse. The typical new mortgage taken out to buy a home in NSW has climbed to $700,000. In Victoria, it has climbed to $585,000. These people will be paying a good deal more than an extra $1000 per month if the bets on repeated rate hikes made on the futures market come to pass.

The Reserve Bank says it lifted its cash rate from 0.35 per cent to 0.85 per cent on Tuesday to withdraw the "extraordinary monetary support" put in place during the pandemic.

But the bank says from here on it will be guided by data, and, in a nod to home owners concerned about continual rate hikes, said it expected inflation to climb just a bit more before declining back towards its target next year.

Financial markets don't see it that way. They have priced in (in other words, bet money on) rate hikes in July, August, September, October, November, December, February, March, April and May.

But there are reasons to believe the bank is right about inflation.

It doesn't seem that way with electricity prices set to climb by between 8 and 18 per cent in NSW, 11 per cent in Queensland, 5 per cent in Victoria, and as much as 20 per cent in South Australia. [The only jurisdiction without an increase in prospect is the Australian Capital Territory, which has 100 per cent renewables and fixed long-term contracts.]

Fortunately for overall inflation, electricity accounts for less than 3 per cent of the typical household budget. Gas accounts for less than 1 per cent. Even low earners spend little more than 4 per cent of their income on electricity.

While the price of vegetables is soaring (heads of lettuce are selling for $10), we spend less than 1.5 per cent of our income on vegetables.

The best measure of overall price increases remains the official one of 5.1 per cent for the year to March, calculated by the Bureau of Statistics.

It is a more alarming increase in inflation than Australians are used to. But what matters for the Reserve Bank is whether the 5.1 per cent is set to turn down and head back towards the target of 2 to 3 per cent, or climb further away from it.

Australia is almost uniquely disadvantaged among developed nations in getting a handle on what's happening to inflation, being one of only two OECD members (the other is New Zealand) to compile its consumer price index quarterly, instead of monthly.

By the time Australia's index is published, several of the measures in it are months old, and they don't get updated for another three months.

It has been said to make the bank's job like driving a car while looking through the rear-view mirror.

Fortunately the Bureau of Statistics is gearing up to produce a monthly index. Meanwhile, in the United States - which is subject to the same international price pressures as Australia - most measures of inflation eased in April.

Wages growth, which the Reserve Bank said last month seemed to be "picking up", remained dismal in the figures released a few weeks later - at just 2.4 per cent in the year to March. That was well short of the 2.7 per cent forecast in the budget for the year to June, and not enough to do anything to further fuel inflation.

Australia has a history of aggressive interest rate hikes to tame inflation.

In 1994, Reserve Bank governor Bernie Fraser rammed up the cash rate from 4.75 per cent to 7.5 per cent in a matter of months. But that was when wage growth was well above inflation, and the bank was trying to dampen "demands for wage increases" to prevent a wage-price spiral.

We don't even have the beginnings of that yet. Unless the bank wants to needlessly impoverish Australians, and keep going until it pushes them out of work, it will increase rates cautiously from here on.