RBA Raises Cash Rate to 4.85%, Fifth Hike of 2026, in Split Vote

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% on Tuesday, Nov. 3, its fifth increase this year, saying inflation is broadly based and now forecast to stay high for longer. The decision was split: six members of the Monetary Policy Board voted for the hike and three voted to leave the rate at 4.60%, the RBA said in its statement.

The new rate takes effect on Wednesday, Nov. 4, according to the RBA's cash rate table. The rate is now the highest since late 2008, IBTimes Australia and Pound Sterling Live reported. Money markets had priced about an 80% chance of a hike, IBTimes Australia said.

Why did the RBA raise rates?

The RBA raised rates because its inflation outlook got worse. "Inflation remains elevated and recent data indicate that it is broadly based," the board said. It said higher fuel and commodity prices linked to the conflict in the Middle East were part of the reason, and that domestic capacity pressures were "a little tighter than earlier thought."

Inflation is not expected to reach the top of the 2% to 3% target range until late 2027, about three quarters later than previously forecast, the RBA said. "The Board is conscious of the period in which inflation has been too high," the statement said.

The board also flagged a weaker economy. It said growth is slowing, housing prices have fallen significantly and the unemployment rate has risen.

RBA forecasts at a glance

Forecast (year-ended)	Dec. 2026	Dec. 2027	Dec. 2028
Consumer Price Index	4.5%	2.7%	2.4%
Trimmed mean inflation	3.6%	2.9%	2.4%
GDP growth	1.6%	1.3%	1.5%
Unemployment rate	4.7%	4.9%	5.1%
Brent assumption (US$/bbl, quarter)	109.5	86.9	79.1

Source: RBA, Statement on Monetary Policy, November 2026, Table 3.1.

How did markets react?

Markets took the hike as a sign the cycle may be near its end. The S&P/ASX 200 rose 30.3 points, or 0.34%, to close at 8,886.8, IBTimes Australia reported, a figure that matches Yahoo Finance data. Energy shares were the weakest group as oil prices fell. Woodside dropped 3.5% and Santos 3.7%, the report said.

The Australian dollar fell about 0.3% to 69.76 U.S. cents after the decision, IBTimes Australia said. It traded near 69.9 cents at about 13:50 GMT, Yahoo Finance data show. The three-year government bond yield fell about 8 basis points, IBTimes Australia reported.

Pound Sterling Live said the statement dropped earlier wording about further rate increases. UBS chief economist George Tharenou called the statement "clearly dovish," IBTimes Australia reported. Westpac's Luci Ellis said "this is likely the peak of the cycle," according to Pound Sterling Live.

What comes next?

The board said it "will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions." Its forecasts assume the cash rate rises by about 35 basis points by mid-2027, based on market pricing, the RBA said.

Other major central banks held last week. The Bank of Japan held at 1.25% on Oct. 30 and the European Central Bank kept rates on hold on Oct. 29. For the oil price swings feeding into inflation forecasts, read about Monday's 7.6% plunge in oil and follow our energy market news.