RBA Hikes to 4.85%, Fifth 2026 Rise: AUD Hinges on Guidance

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.85% on Tuesday, its fifth increase of 2026 and the highest level since 2008. The decision was announced at 2:30 p.m. AEDT (0330 GMT), with Governor Michele Bullock's press conference following. The bank had lifted the cash rate to 4.60% in September, and hawkish remarks from senior officials since then pushed forecasters toward another rise. The Australian dollar traded near 70 US cents into the decision.

Context — why the RBA hiked again now

The trigger sits in the inflation data. September-quarter trimmed mean inflation rose 1.0%, against the RBA's own 0.8% forecast. That miss came on top of hawkish commentary from senior officials after the September move to 4.60%, which shifted the consensus toward a November hike. HSBC chief Australia economist Paul Bloxham made a November hike his base case. The RBA lifted the cash rate to 4.60% in September, and officials' remarks since then pushed forecasters toward another rise.

The backdrop complicates the outlook. House prices fell for a seventh consecutive month in October, adding to pressure on borrowers as earlier rate rises continue to feed through the economy. Any acknowledgment of that strain in Tuesday's statement would be read as a signal the RBA is nearing the top of its cycle.

AMP chief economist Shane Oliver expects the RBA to hike to step up its fight against inflation. He argues that holding steady could damage its credibility and further entrench higher inflation expectations. That marks a shift for Oliver, who had earlier not expected a November hike.

ANZ, which also expects a rise, sees risk of more to come. Its economists said concerns among senior RBA officials that inflation expectations might be shifting raise a material risk the cash rate reaches 5.10% in December or February. That is the hawkish tail of the distribution.

Economists agree the RBA will hike again, but the split over what comes next, along with a hike already in the price, means the guidance will matter more than the move for the Australian dollar.

Data — what the numbers show

The arithmetic of the decision is narrow. A 25 basis point rise takes the cash rate from 4.60% to 4.85%, the fifth increase this year and the highest since 2008. The trimmed mean at 1.0% for the September quarter ran two-tenths above the RBA's 0.8% forecast — a small gap that nonetheless forced a forecast revision and a hike.

Metric	Reading
Cash rate before	4.60%
Cash rate after	4.85%
September-quarter trimmed mean	1.0%
RBA forecast	0.8%
House prices, October	seventh straight monthly fall
AUD/USD	near 70 US cents

The forecast split is the second number that matters. Deutsche Bank stands alone with an RBA hold call as 31 of 32 economists tip a hike. JPMorgan joined the hike call for the November meeting and sees a tightening bias persisting. ING lifted its AUD/USD target to 0.71 as it backed a 25 basis point RBA hike next week. Natixis' Garcia Herrero expects a back-to-back hike after the hot CPI print.

Against that, the Australian dollar's starting point near 70 US cents means the currency enters the decision with much of the hike already reflected in its level.

Analysis — what it means for markets and sectors

The Australian dollar is the cleanest expression of the guidance split. A clear signal that further tightening is possible would offer support for the currency and push front-end yields higher. A message closer to AMP's hike-and-hold view could see the currency give up ground. With a hike close to fully priced, the Australian dollar may struggle to rally much on the decision itself, and a sell-the-fact dip is possible if the statement leans toward a pause.

Rate-sensitive domestic sectors carry the second-order exposure. House prices fell for a seventh consecutive month in October, so lenders and consumer-facing names absorb the pass-through of earlier rises while the RBA adds another. Any acknowledgment of that strain in Tuesday's statement would be read as a signal the RBA is nearing the top of its cycle — which matters more for those borrowers than the 25 basis points itself.

The counter-argument deserves weight. ANZ's concern is that inflation expectations are shifting, which would justify a 5.10% cash rate by December or February and make a pause the riskier choice. Oliver's position is the mirror image: this month's move should be enough to keep the bank on hold for the time being. Deutsche Bank's lone hold call shows the consensus is not unanimous.

The Australian dollar also faces strong outside drivers, with the US midterm elections and Iran tensions setting the broader risk mood. With the Federal Reserve also on a hiking path, rate differentials offer less of a tailwind than the RBA move alone might suggest. Positioning reflects that: hike expectations are crowded, so the marginal flow into AUD is smaller than the headline move implies.

Outlook — what to watch next

The statement and Bullock's press conference are the immediate catalysts. Traders will read the language for whether the RBA keeps a tightening bias or signals a pause, with the front end of the curve and AUD/USD the fastest-reacting instruments. ING's 0.71 AUD/USD target sits above the current level near 70 US cents and depends on the bank validating its hike call.

The next scheduled test is the December or February window that ANZ flags for a possible 5.10% cash rate. Between now and then, the outside drivers dominate: the US midterm elections and Iran tensions set the broader risk mood, and the Federal Reserve's own hiking path shapes the rate differential.

Watch the 70 US cent handle on AUD/USD as the reference level. A hold-and-signal-pause combination is the scenario most likely to break it, while a tightening bias keeps the pair supported near that line.

Frequently Asked Questions

What does the RBA decision mean for Australian mortgage holders?

The cash rate moves to 4.85%, the highest since 2008, so variable-rate borrowers face another increase in repayments on top of the four earlier hikes this year. The strain is already visible: house prices fell for a seventh consecutive month in October. Any signal in the statement that the RBA is nearing the top of its cycle would matter more for borrowers than this single 25 basis point move.

Why is the Australian dollar barely reacting to a rate hike?

Interbank futures had priced a hike as likely, so the decision itself carries little new information for the currency. The Australian dollar is more sensitive to the tone of the statement and Bullock's comments than to the move. A signal that further tightening is possible would support the AUD; a message closer to AMP's hike-and-hold view could see it give up ground.

What is the split among economists on the RBA's next move?

Deutsche Bank stands alone with a hold call as 31 of 32 economists tip a hike. ANZ sees a material risk the cash rate reaches 5.10% in December or February, while AMP's Shane Oliver thinks this month's move should be enough to keep the bank on hold for now. JPMorgan expects a tightening bias to persist.

Bottom Line

The 25 basis point hike to 4.85% is fully priced; the RBA's guidance, not the move, decides the Australian dollar's next leg.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.