The Reserve Bank this morning increased the official cash rate, as expected, by 25 points to 3%.

Reserve Bank governor Graeme Wheeler says inflationary pressures are becoming apparent in the economy, especially in construction and other non-tradable sectors.

As well, he says the bank does not believe the high exchange rate is sustainable.

The Council of Trade Unions responded the move will raise mortgage costs for home owners.

The organisation says the Government's focus should be on getting housing costs down, and raising wages to make housing more affordable.