- Decision
- Raise
- Rate change
- 25 bps
- cash rate
- 4.85%
The Reserve Bank of Australia’s Monetary Policy Board raised the cash rate target by 25 basis points to 4.85% in a six-to-three vote, citing a materially higher inflation outlook and growing risks that elevated inflation expectations become embedded, following September’s 25-basis-point increase to 4.60%. Inflation remains broadly based, with domestic capacity pressures tighter than previously assessed and higher fuel costs passing through to other goods and services. Inflation is not expected to reach the top of the 2–3% target range until late 2027, around three quarters later than previously forecast. Earlier rate increases have tightened financial conditions, and output growth is projected to slow further over the coming year as higher interest rates and falling housing prices weigh on household consumption and dwelling investment. Unemployment is expected to rise more than projected in August, although near-term business investment is forecast to strengthen. Globally, Middle East-related oil supply disruptions continue to lift energy prices and inflation, while artificial intelligence-related investment has supported stronger-than-expected growth in Australia’s major trading partners. The Board said it would do what it considers necessary to return inflation sustainably to target, with decisions guided by incoming data and its evolving assessment of the outlook and risks.
Rate evolution
From July 2025 to November 2026, the Reserve Bank of Australia’s cash rate target rose by a net 100 basis points to 4.85%, after an August cut and a pause through December gave way to three consecutive hikes from February, two holds on 16 June and 11 August, and further increases on 29 September and 3 November 2026. That early easing and the ensuing hold reflected substantial disinflation, with underlying inflation near the midpoint of the 2–3% range, while private demand recovered only gradually and the Board weighed weak productivity, high unit labour costs, tight labour conditions and elevated global uncertainty. By late 2025, however, the Board said underlying inflation had picked up, private demand and housing were strengthening and financial conditions had eased, shifting its language from more balanced inflation risks to a more cautious assessment of persistence and upside risk.
Holding the cash rate target at 4.35% in June, the Board said headline and underlying inflation were still too high and that disruption to global oil supply was adding to inflation and passing through to other prices, but it also noted tighter financial conditions, signs consumer spending was slowing as expected, a shift in housing market momentum and a higher-than-expected unemployment rate in April, and judged it appropriate to assess the effects of earlier increases and the oil supply disruption. In August, the Board again held the rate at 4.35%, judging monetary policy somewhat restrictive and the economy to be slowing as expected, but on 29 September it raised the cash rate target by 25 basis points to 4.60% as some upside risks materialised, with recent data showing stronger-than-expected growth and inflation, further oil supply disruptions lifting energy prices, higher fuel costs passing through to other prices and domestic capacity pressures persisting.
On 3 November, the Board raised the cash rate target by a further 25 basis points to 4.85%, citing broadly based underlying inflation, tighter-than-previously-estimated capacity pressures and indications of fuel price pass-through, with inflation now forecast to reach the top of the 2–3% target range only in late 2027 and a growing risk that higher inflation expectations would become embedded, despite slowing activity, significant falls in housing prices and rising unemployment.