Markets had largely expected the Reserve Bank of Australia to lift rates on Tuesday 3 November, so the bigger news sat in the forecasts released alongside it. In its November Statement on Monetary Policy, the bank’s staff wrote that “Headline inflation is expected to peak at 4.5 per cent in the December 2026 quarter”, and the RBA does not expect the headline rate to come back under 3 per cent until late 2027.
The Monetary Policy Board took the cash rate target from 4.60 per cent up to 4.85 per cent in a decision released at 2.30pm AEDT, the fifth increase of 2026, with six members in favour and three wanting no change. Its explanation, in the decision statement, read: “Given the revised inflation outlook and the continuing upside risks, the Board judged that a further tightening in financial conditions is warranted to support the return of inflation to target.”
What the New Forecasts Show
The forecasts, finalised on 28 October, start from headline inflation of 3.9 per cent over the year to the September quarter. After the December peak, the RBA expects headline inflation of 3.7 per cent in June 2027 and 2.7 per cent in December 2027, easing to 2.4 per cent by December 2028.
Trimmed mean inflation, the underlying measure, stood at 3.7 per cent and is forecast to reach 2.5 per cent in June 2028. The Board’s statement said inflation is now “forecast to remain elevated through much of 2027”, with the return to the top of the 2 to 3 per cent target band coming around three quarters behind the bank’s earlier forecast.
The Cash Rate Path Built Into the Numbers
The forecasts also assume a cash rate path drawn from market pricing: a rise of around 35 basis points by mid-2027, as much as 50 basis points above the August path, before it settles at 4.8 per cent in 2028. The direction is the reverse of May 2025, when the RBA cut the cash rate.
The Dollar and the Analysts’ Read
The Australian dollar dipped shortly after the announcement. FXStreet had AUD/USD 0.20% lower on the day at 0.6980 in a report last updated at 04:06 GMT, and its writer Lallalit Srijandorn reported at 03:53 GMT that AUD/JPY had eased to around 110.20. Before the decision, Srijandorn had quoted Brown Brothers Harriman strategists as saying “cash rate futures imply 83% probability of a hike”.
Eamonn Sheridan of investingLive, writing at 03:30 GMT, read the six to three split as softening the hawkish message and noted that the Board had not pointed to further increases. On the currency, he wrote: “For markets, the combination of a well-flagged hike, a three-member dissent and no explicit tightening bias leans against a strong rally in the Australian dollar.”
His reading sits nearer to AMP’s Shane Oliver, who expected a rise that ought to let the bank hold afterwards, than to ANZ, which saw a material risk of the cash rate reaching 5.10% in December or February, according to an investingLive preview at 00:25 GMT. That preview also noted that the September-quarter CPI, which this site previewed on 27 October, showed trimmed mean inflation of 1.0% against the RBA’s 0.8% forecast.
The Statement on Monetary Policy also covered the currency: “The Australian dollar has appreciated since the start of the year and is judged to be around estimates of its long-run equilibrium.”
Jobs and Growth
Unemployment averaged 4.6 per cent in the September quarter. The RBA expects the rate to reach 4.7 per cent in December 2026 and 5.1 per cent by the end of 2028, around a quarter of a percentage point higher than it previously expected. GDP growth is forecast at 1.6 per cent in December 2026 and 1.5 per cent in December 2028.
The staff added a caveat: “It is possible we have misjudged the supply capacity of the economy and labour market.”
The Forecast Behind the Forecast: Oil
The Board pointed to energy: “Global oil supply disruptions are maintaining upward pressure on global and domestic energy prices and inflation.” The oil price assumed for the December quarter is 35 per cent above the one used in August, with Brent crude taken at US$109.5 a barrel in December 2026, falling to US$95.3 in June 2027 and US$79.1 by December 2028.
Both the 4.5 per cent peak and the return under 3 per cent in late 2027 rest on that assumed oil path, alongside the cash rate path taken from the market.
More on rates and the economy is in our Financial section.
Sources: Reserve Bank of Australia, “Statement by the Monetary Policy Board: Monetary Policy Decision”, Media Release 2026-30, 3 November 2026 (https://www.rba.gov.au/media-releases/2026/mr-26-30.html); Reserve Bank of Australia, Statement on Monetary Policy, November 2026: Overview (https://www.rba.gov.au/publications/smp/2026/nov/overview.html) and Outlook (https://www.rba.gov.au/publications/smp/2026/nov/outlook.html); FXStreet, “RBA Governor Bullock to address a press conference after raising interest rate”, 3 November 2026 (https://www.fxstreet.com/news/rba-expected-to-raise-interest-rate-to-485-202611022330); FXStreet, “Australian Dollar softens against Japanese Yen as RBA lifts rate to 4.85% in fifth hike this year”, 3 November 2026 (https://www.fxstreet.com/news/australian-dollar-softens-against-japanese-yen-as-rba-lifts-rate-to-485-in-fifth-hike-this-year-202611030353); investingLive, “Reserve Bank of Australia (RBA) 25bp rate hike, as widely expected”, 3 November 2026 (https://investinglive.com/central-banks/reserve-bank-of-australia-rba-25bp-rate-hike-as-widely-expected/); investingLive, “RBA set for fifth hike of 2026 to 4.85%: three views on what comes next”, 3 November 2026 (https://investinglive.com/central-banks/rba-set-for-fifth-hike-of-2026-to-4-85-three-views-on-what-comes-next/)
Photo: Klauskazamias, CC0, via Wikimedia Commons.
Looking up at the tower at 39 Martin Place in Sydney’s financial district, September 2025. A stand-in image, unconnected to the market moves reported here.
