RBA Raises Cash Rate to 4.85%, Its Highest Since 2008, in a 6-3 Vote as It Lifts Its Inflation Forecasts

The Reserve Bank of Australia raised its cash rate target by 25 basis points to 4.85% on Tuesday, November 3, 2026, lifting Australia's benchmark borrowing cost to its highest level since late 2008. The decision was announced at 2:30 p.m. Sydney time, which was 10:30 p.m. ET on Monday, and the new rate takes effect on Wednesday, November 4.

The RBA's Monetary Policy Board was split. According to the bank's official statement, six members voted for the increase and three voted to keep the cash rate at 4.60%.

Fifth increase of the year

Tuesday's move was the fifth rate increase of 2026. The RBA's cash rate history shows earlier increases that took effect on February 4, March 18, May 6 and September 30, with the board holding steady in June and August. Together, the five moves have lifted the cash rate by a combined 1.25 percentage points from 3.60% at the start of the year.

ABC News reported that the cash rate has not been this high since late 2008. The RBA's website lists the next scheduled decision for 2:30 p.m. on December 8, 2026.

Why the board moved

In its statement, the board said inflation "remains elevated and recent data indicate that it is broadly based." It said its staff had revised the inflation outlook "materially higher," partly because of higher fuel and other commodity prices tied to the conflict in the Middle East, and partly because domestic capacity pressures were judged to be "a little tighter than earlier thought."

The statement also pointed to technology costs, saying AI-related investment "is driving rapid growth in prices for technology-related goods." It added that business liaison showed many firms facing cost pressures and either raising prices or planning to do so.

The RBA now forecasts that inflation will remain elevated through much of 2027 and will not return to the top of its 2% to 3% target range until late 2027, "around three quarters later than previously forecast." The board said this "presents upside risks to inflation expectations," and that some measures of those expectations have risen recently.

"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," the statement said.

New forecasts point to a slower economy

The board said the increases since the start of the year have tightened financial conditions, that the economy is slowing, that housing prices "have fallen significantly" and that the unemployment rate has risen. It expects output growth to slow further over the coming year, with higher rates and falling housing prices weighing on dwelling investment and household spending, while business investment, including spending on data centres, is forecast to be stronger in the near term.

According to ABC News' reporting on the RBA's updated forecasts:

• The unemployment rate, currently 4.7%, is now forecast to average 5.1% in the December quarter of 2028, up from 4.8% in the August forecasts.
• Headline inflation is expected to end 2026 at 4.5%, compared with the 3.6% forecast three months earlier.
• Wages are forecast to rise 3.4% this financial year, against a forecast 3.7% rise in prices, meaning real wages would shrink.

Last week's third-quarter consumer price data showed annual trimmed mean inflation, the RBA's preferred underlying measure, at 3.7%, ANZ economist Sophia Angala noted in comments reported in ABC's live coverage.

Bullock on recession risk

At her post-meeting press conference, Governor Michele Bullock did not rule out further increases. Asked whether the RBA risked pushing Australia into recession, she said: "The board's dual mandate is still in play here. We are not looking to tip the economy into recession if we can avoid it. But we do need to get inflation down, and we do have excess demand at the moment, so that is the key."

Bullock said the bank's central forecast does not show a recession but does show growth slowing "markedly," ABC reported.

Market reaction and economists' views

The Australian dollar fell 0.3% to 69.76 U.S. cents shortly after the decision, according to ABC's live coverage, and the S&P/ASX 200 index closed 0.3% higher. By 7:11 a.m. ET, the Australian dollar was trading at about 69.82 U.S. cents, according to Yahoo Finance data.

Economists quoted by ABC differed on what comes next. BetaShares economist David Bassanese said his base case is another increase in February 2027, adding that the RBA would "likely feel able to leave rates on hold" at its December meeting. EY chief economist Cherelle Murphy said that with the cash rate at its highest level in almost two decades, "it is likely that policy is sufficiently restrictive," though she said further increases were possible.

The board said it "will continue to do what it considers necessary to bring inflation sustainably back to target" and will be guided by incoming data and its assessment of the outlook and risks.