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 November 3, 2026. The decision marks the fifth increase this year and takes the rate to its highest level since 2008. Six members of the nine-person Monetary Policy Board voted for the hike; three preferred to leave the rate unchanged at 4.60 percent. The board cited elevated and broadly based inflation, with staff forecasts revised materially higher.

Governor Michele Bullock and the board statement noted that higher fuel and commodity prices linked to the conflict in the Middle East have contributed to the upward revision. Domestic capacity pressures also appear slightly tighter than earlier assessments. Inflation is now expected to remain above 3 percent for the coming year, with an increasing risk that higher inflation expectations become embedded. The board judged that further tightening of financial conditions is warranted to support a return to the 2-3 percent target band.

The statement removed an earlier explicit reference to the possibility of additional rate rises if needed. Bullock said it was unclear what the next move would be and that the three dissenting members placed greater weight on downside risks from a weakening housing market and rising unemployment. After five hikes in 2026 the board views the current level as an appropriate point to assess the economy’s response, while remaining alert to upside inflation risks. Markets now price a high probability that the RBA holds in December.

The Australian dollar slipped modestly after the announcement and bond yields adjusted. Mortgage holders face higher repayments at a time when household budgets are already under pressure from elevated living costs. The government has faced calls for budget savings as interest payments rise. Other major central banks have largely paused in recent weeks, leaving the RBA as an outlier in continuing to tighten.

Updated forecasts in the November Statement on Monetary Policy show trimmed-mean inflation remaining elevated longer than previously projected. Headline consumer prices rose above 4 percent in the year to September. The board remains conscious of the extended period in which inflation has exceeded target. Further data on wages, spending and the labour market will shape the December decision. The split vote indicates that the threshold for another increase has risen even as the majority still sees inflation as too high.

The rate path interacts with global energy markets. Persistent high fuel costs from the Middle East conflict feed directly into Australian inflation through transport and other prices. Domestic factors, including capacity constraints, amplify the effect. The RBA’s willingness to act on a close vote shows the priority it places on anchoring expectations. Households and businesses will now watch whether the cumulative 125 basis points of tightening in 2026 begins to slow demand enough to ease price pressures without a sharper rise in unemployment.