Reserve Bank of Australia Raises Cash Rate to 4.85 Percent

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85 percent on 3 November 2026. The decision took the benchmark to its highest level since 2008. The bank cited persistent inflation and rising energy costs associated with the Iran war as principal factors.

The move followed a series of earlier increases as Australian inflation remained above the 2-3 percent target band. Energy prices have been elevated by disruptions to oil and gas flows through the Strait of Hormuz and related insurance and freight premiums. The RBA board judged that further tightening was required to return inflation to target over the medium term.

Markets had priced in a high probability of a 25-basis-point rise. The Australian dollar firmed modestly against the US dollar in the immediate aftermath. Mortgage rates for variable-rate borrowers are expected to adjust upward within weeks, increasing monthly repayments for households with outstanding housing debt.

The bank’s statement noted that while goods inflation had moderated in some categories, services inflation and energy-related costs continued to exert upward pressure. Wage growth remained solid but was not identified as the dominant driver. The board left open the possibility of further adjustments depending on incoming data on prices, employment and global energy markets.

Australia’s exposure to global energy prices is significant because of its role as both a large LNG exporter and a net importer of refined petroleum products. The combination of higher domestic energy costs and tighter monetary policy is expected to weigh on household consumption in the coming quarters. Business investment plans may also be reviewed in light of higher funding costs.

The decision places Australian policy rates above those of several peer central banks that have already begun or signalled easing cycles. The divergence reflects the particular combination of sticky domestic inflation and the external energy shock. Subsequent meetings will examine whether the November increase is sufficient or whether additional steps are required.