Markets
RBA Hiked to 4.85% in a 6–3 Split, Then Hinted at a Pause
The Reserve Bank of Australia raised its cash rate 25 basis points to 4.85% on Tuesday, its fifth hike of 2026, but three of nine members voted to hold. The Australian dollar fell 0.3%.
Australia's central bank tightened again, and told markets in the same afternoon that it may be done for now. On Tuesday, November 3, the Reserve Bank of Australia's Monetary Policy Board raised the cash rate target by 25 basis points to 4.85%, the fifth increase of 2026 and the highest level since November 2008. The decision was not unanimous: six members voted for the increase and three wanted to leave the rate at 4.60%. Market pricing had given a hike about an 89% chance by midday, according to ABC News, so the surprise was in the vote, not the move.
The statement explained the hike with inflation and conceded almost everything else. Data confirm that underlying inflation "remains broadly based", it said, and inflation is now expected to stay above 3% for the coming year and not to reach the top of the 2% to 3% target range until late 2027. On that basis the board judged that "a further tightening in financial conditions is warranted". The same statement also said that the economy is slowing, that housing prices have fallen significantly and that the unemployment rate has risen, and that unemployment is projected to rise by more than the August forecasts showed.
Governor Michele Bullock drew the line between the two at her press conference. "Inflation is too high, and our forecasts suggest it will stay higher for longer," she said, adding that the bank was not reacting to oil prices directly but to domestic capacity pressures, including strong investment in data centres. Asked whether rates were now on hold, she said it was "probably a good point to just take stock" and that she did not know what the next move would be. The central forecast, she said, does not include a recession.
Markets heard the second half. The Australian dollar slipped 0.3% to 69.76 US cents within minutes of the decision, and the ASX 200 closed about 0.3% higher, at 8,886.8, having added to its gains after the announcement. Economists split on what comes next: UBS called the statement "clearly dovish" and expects the bank to hold, Capital Economics expects the next move to be a cut, probably in late 2027, while Betashares still expects one more increase, in February, and ANZ flagged a risk of 5.10%.
For households the cumulative cost is now large. Canstar estimates that a $600,000 mortgage costs about $456 a month more than at the start of the year, and Macquarie Bank has already said it will lift its variable home-loan rates by 0.25 percentage points from November 19. A 6–3 vote with a governor talking about taking stock is how central banks usually signal the top of a cycle; whether it is the top will depend on the next inflation readings, not on Tuesday's words.