Key takeaways
- The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% on November 3, 2026, its fifth increase of the year and the highest level since November 2008.
- Six of the nine board members voted to hike and three voted to hold at 4.60%, the first sharply divided vote in several months, according to Australian media coverage.
- The central bank now forecasts headline inflation peaking at 4.5% in the December quarter and staying above 3% until late 2027, about three quarters longer than it projected in August.
- The Australian dollar fell about 0.3% to near 0.6980 against the US dollar because the hike was already priced in and Governor Michele Bullock offered no commitment to further tightening.
The Reserve Bank of Australia (RBA) raised its cash rate target by 25 basis points to 4.85% on November 3, 2026, in its latest policy statement. The RBA interest rate decision was the central bank’s fifth increase this year and left borrowing costs at their highest since 2008. It was a majority vote, with six members in favour and three preferring to hold at 4.60%, and the currency fell rather than rose.
A basis point is one hundredth of a percentage point, so a 25 basis point move is a quarter of a percentage point. The decision matters beyond Australia because it shows a developed-economy central bank still tightening into an energy shock while its own board questions how much further to go.
What did the RBA interest rate decision change?
The Monetary Policy Board lifted the cash rate from 4.60% to 4.85%. According to Bloomberg, the nine-member board has now delivered the most aggressive tightening cycle among developed economies this year.
The bank also sharply raised its inflation forecasts. According to investingLive, headline inflation is projected to peak at 4.5% in the December quarter, with both headline and trimmed mean inflation staying above 3% until late 2027. That is roughly three quarters longer than the bank forecast in August. Trimmed mean inflation, which strips out the most volatile price moves, is forecast at 3.6% in the final quarter of 2026, according to FXStreet.
The bank’s target range is 2 to 3%. Its statement said inflation is not expected to reach the top of that range until late 2027, as quoted by Australian Property Update.
Why is the RBA still raising rates?
The RBA pointed to elevated inflation, the war in the Middle East and higher oil prices, according to SBS News. TradingView’s summary of the decision added domestic capacity constraints and AI-related demand for technology goods to the list of price pressures.
Governor Michele Bullock said the tightening was aimed at domestic capacity pressures and that inflation is largely locked in for the next year, according to investingLive’s account of her press conference. She acknowledged the cost, saying some pain now is meant to prevent worse later, according to Time News. She also said weak growth could make households feel as if Australia were in a recession, although it technically is not, per Australian Property Update.
The political reaction was immediate. Treasurer Jim Chalmers said Australians continue to pay a “hefty price” for the protracted Middle East conflict, according to ABC News.
Why did the Australian dollar fall after a rate hike?
The Australian dollar slipped about 0.3% to near 0.6980 against the US dollar after the announcement, according to Pound Sterling Live. It touched a two-week low below 0.70, TradingView reported.
Currencies tend to respond to expected future rates rather than the move itself. Before the meeting, markets assigned about an 82% probability to a hike after a hotter-than-expected inflation report, according to the ASX RBA Rate Tracker cited by FXStreet. With the hike delivered, attention shifted to guidance, and there was little of it. Norman Liebke of Commerzbank said markets are not pricing in any further increase and that the hurdle for another one is likely quite high, per FXStreet.
What does the split vote say about the rate path?
Three dissenters wanted to leave rates unchanged. Bullock told reporters she does not know what the next move will be and that waiting for data is probably sensible, according to investingLive. She also said that after five hikes it is a good moment to “take stock”, per Pound Sterling Live.
Bullock further said the full effect of this year’s tightening has yet to feed through to the economy, according to Bloomberg. The RBA acknowledged signs of a slowing economy, including rising unemployment, per SBS News.
Forecasters differ on what follows. Commonwealth Bank of Australia economists, quoted by ABC News, expect the RBA to begin cutting late next year after this hike. Other analysts, cited by Australian media, say the case for further increases is weakening but not closed.
How does this connect to global markets?
The decision landed as global investors watched the United States midterm elections. According to FXStreet, the US dollar was largely directionless while the market waited for the result. The RBA’s reliance on oil as an explanation echoes pressures elsewhere, as covered in Intelligence Report’s analysis of oil, midterms and the Bank of England and of divergent eurozone inflation and the ECB.
FXStreet reported that after the Federal Reserve held rates at its late-October meeting without a clear steer on December, traders were pricing a high chance of a Fed hike that month. A Fed move would shape the outlook for the Australian dollar. Rabobank has lowered its 9 and 12 month AUD/USD forecasts to 0.72, citing limited upside if the Fed tightens again, according to TMGM.
What to watch
- RBA’s final meeting of 2026: the November session was described by Australian media as the second-last of the year, so one decision remains. Watch whether the three dissenters grow in number.
- Australian inflation and labour data: unemployment is expected to rise further, and a sharper deterioration would strengthen the case for holding.
- Oil prices: softer crude on Monday eased inflation worries, according to Business Recorder, and the RBA cited fuel costs as a driver.
- The Federal Reserve’s December decision: it will influence both the US dollar and the AUD/USD pair.
- AUD/USD around 0.70: a sustained move below that level would signal markets believe the tightening cycle is over.
Frequently asked questions
What is the RBA cash rate after the November 2026 decision?
The Reserve Bank of Australia set its cash rate target at 4.85% on November 3, 2026, up 25 basis points from 4.60%. It is the highest level since November 2008 and the fifth increase this year, according to the RBA's own policy statement and Australian media.
Was the RBA decision unanimous?
No. Six of the nine Monetary Policy Board members voted to raise the cash rate by 25 basis points, while three voted to leave it at 4.60%. The RBA's statement described the outcome as a majority decision, and Australian outlets noted the division.
Why did the Australian dollar fall after the RBA raised rates?
Markets had largely priced in the hike, and the divided vote and lack of commitment to further tightening reduced expectations of another increase. Analysts at Commerzbank called it a relatively dovish hike. The Australian dollar fell about 0.3% to near 0.6980 against the US dollar.
Sources
- Statement by the Monetary Policy Board: Monetary Policy Decision
- RBA's Bullock Signals Policy Pause After Split Decision to Hike (Bloomberg)
- RBA hikes cash rate to 18-year high of 4.85 per cent, as it happened (ABC News)
- RBA's Cup Day call takes rates to 18-year high; board divided (SBS News)
- RBA lifts cash rate to 4.85% in split 6-3 vote (investingLive)
- RBA's Bullock offers no guidance (investingLive)
- Australian Dollar Pressured as RBA Signals Hiking Cycle Is Near Its End (Pound Sterling Live)
- Australian Dollar Falls Despite 5th RBA Hike (TradingView)
- Australian Dollar: Dovish hike weighs on aussie, Commerzbank (FXStreet)
- Australian Dollar Price Forecast: Blame the RBA (FXStreet)
Top image: Queensland State Archives from Runcorn, Queensland, Australia / Wikimedia Commons (Public domain)
This article was produced by the Intelligence Report Desk. Sources are linked below.
