JPMorgan Calls RBA Hike to 4.85%, Sees Hawkish Bias

JPMorgan now expects the Reserve Bank of Australia to raise its cash rate to 4.85% at the meeting due 2:30pm Sydney time on Tuesday, 3 November 2026 (0330 GMT, 2230 US Eastern on Monday), according to a call led by the bank's chief economist for Australia, Ben Jarman. Markets price roughly a 90% probability of the quarter-point move. The cash rate stands at 4.60% after September's increase, so the decision would mark the RBA's fifth hike of 2026 and lift the benchmark to its highest level of the year.

Context — why the RBA hike call matters now

The RBA's tightening cycle has run through 2026, and the September quarter-point increase took the cash rate to 4.60%. JPMorgan's call rests on the board's own communication: senior officials have consistently signalled that inflation is not yet under control and that more work remains. That framing, rather than any single data release, is what pushed the US bank into the hike camp.

The catalyst chain runs from inflation data into official commentary and then into market pricing. Hot CPI readings earlier in the cycle already drew other houses into the hike camp, and a back-to-back move had been flagged by Natixis' Alicia Garcia Herrero before JPMorgan added its voice. ING separately lifted its AUD/USD target to 0.71 while backing a 25bp increase next week.

Positioning now reflects that consensus. With about 90% of the move priced, the decision itself carries limited information for the currency. The marginal surprise sits in the guidance and in the RBA's quarterly Statement on Monetary Policy, published alongside the decision, which refreshes the board's forecasts for inflation, growth and unemployment.

Australian data released earlier on Monday sharpened the tension. The S&P Global manufacturing survey showed factory activity contracting for a second month, with new orders falling at the fastest pace since late 2024, partly because of higher interest rates. The same survey showed input costs rising at the fastest rate since June and manufacturers raising selling prices more quickly.

That combination — weakening activity against sticky price pressure — is the backdrop the board must weigh. JPMorgan expects weak activity to limit the scope for further hikes after November, but sees the RBA retaining a tightening bias while inflation stays high. For AUD/USD and short-dated Australian bond yields, the framing may matter more than the headline number.

Data — what the numbers show

The cash rate sits at 4.60% and a quarter-point increase would take it to 4.85%, the level JPMorgan now expects. That would be the fifth hike of 2026, following the September move that lifted the benchmark from 4.35%.

Market pricing assigns roughly a 90% probability to the increase, leaving about a one-in-ten chance of a hold. ING's revised AUD/USD target of 0.71 sits alongside its 25bp hike call, a level that implies the currency firming from prevailing rates.

Metric	Current	After November hike
RBA cash rate	4.60%	4.85%
2026 hikes to date	Four	Five
Market-implied probability	~90%	—

Manufacturing conditions provide the counterweight. Factory activity contracted for a second consecutive month, with new orders shrinking at the fastest pace since late 2024. Input costs, meanwhile, rose at the fastest rate since June, and manufacturers passed those costs into selling prices at a quicker pace.

That split — falling orders, accelerating costs — frames the policy trade-off. The activity side argues for caution; the price side argues for restraint. JPMorgan's read is that the board resolves the tension toward one more hike now, then a pause in action without a pause in language.

Analysis — what it means for markets and sectors

The Australian dollar is the most direct expression of the decision. A hike paired with a clearly hawkish bias would support AUD/USD, while any acknowledgement that weaker growth is doing more of the disinflationary work would point to a peak in the cycle and weigh on the currency. Short-dated Australian bond yields face the same test: the front end is most sensitive to guidance about how much further tightening remains.

Beyond currencies and rates, the second-order effects run through rate-sensitive domestic sectors. Australian banks, consumer discretionary names and property-exposed equities carry the most direct exposure to a higher cash rate, because their earnings and credit costs move with the policy path. Manufacturers are already showing the strain, with new orders falling partly because of higher interest rates.

The counter-argument deserves weight. If activity is deteriorating as fast as the survey suggests, the RBA may be close to the end of its tightening regardless of what it says on Tuesday. JPMorgan itself expects weak activity to reduce the likelihood of hikes beyond November, which means the tightening bias may be rhetorical rather than operational. A hold would validate that view faster than any guidance could.

Positioning reflects the asymmetry. With the hike almost fully priced, the flow of risk sits in the tails: a surprise hold would force a repricing of the front end and the currency, while a hawkish hike largely confirms what is already in the price. Traders leaning long AUD into the decision are paid only if the guidance goes beyond the move.

Higher fuel and shipping costs linked to the Middle East war remain an upside risk to the inflation outlook the board has to weigh. That channel sits outside domestic demand and is not something rate policy can address directly, which complicates any signal that the inflation job is done.

Outlook — what to watch next

The decision lands at 2:30pm Sydney time on Tuesday, 3 November 2026, released with the quarterly Statement on Monetary Policy and updated inflation, growth and unemployment forecasts. Those forecasts are the first place to look for whether the board still sees inflation returning to target without further tightening.

For AUD/USD, ING's 0.71 target is the level the market has been given to work against. The currency's reaction will hinge on the guidance language rather than the rate change itself. On the rates side, short-dated Australian yields are the cleanest read on whether traders accept JPMorgan's persistent-hawkish-bias thesis or start pricing a peak.

Beyond November, the banks have flagged the risk of another move in February. That makes the RBA's next quarterly forecasts and the tone of the post-meeting statement the key inputs for the 2027 path. Any shift toward emphasising weaker growth over sticky prices would be the first credible signal that the cycle has topped.

Frequently Asked Questions

What does the RBA decision mean for Australian mortgage holders?

A hike to 4.85% would raise the cash rate by 25 basis points from 4.60%, the fifth increase of 2026. Variable-rate mortgage repayments typically track changes in the cash rate, so borrowers would face higher monthly interest costs if lenders pass the move through. The guidance accompanying the decision matters for planning: a persistent tightening bias implies more increases may follow, while an emphasis on weaker growth would suggest the peak is near.

Why is a surprise RBA hold a bigger risk than the hike itself?

Markets price roughly a 90% probability of an increase, so the hike is largely reflected in the Australian dollar and short-dated bond yields. A hold would invalidate that consensus and force a rapid repricing, with the currency and the front end of the curve most exposed. The asymmetry is why JPMorgan's call, while widely shared, carries less market information than the guidance that accompanies it.