Global Economic Signals — 2026-11-03

Australia's Central Bank Raises Rates to 18-Year High in Split Vote Signaling End of Tightening Campaign

BLUFIt is unlikely that the RBA raises rates above 4.85 percent at its December meeting, as the split vote and softened guidance signal the tightening cycle has peaked.

The Reserve Bank of Australia's Monetary Policy Board lifted the cash rate target 25 basis points to 4.85 percent on Tuesday, its fifth increase this year, in a 6-3 vote with three members favoring no change at 4.60 percent 12. The board's statement said inflation is broad-based, is forecast to stay elevated through much of 2027, and will not reach the top of the 2-3 percent target band until late 2027, about three quarters later than previously forecast 1. Reuters reported that the board dropped its earlier reference to raising the cash rate further if needed, and the Australian dollar slipped 0.3 percent to $0.6979 2. Governor Michele Bullock said the dissenters weighed downside risks more heavily, citing housing, rising unemployment (4.7 percent) and subdued wage growth 3, while ABC reported she left the door open to further hikes 4.

Analysis
The 6-3 vote and the dropped "increasing the cash rate further, if needed" language show the board has shifted from active tightening to evaluating the lagged effects of five hikes. Confidence is high because the RBA's own statement confirms both the split and the wording change, and independent outlets report consistently, though the dissenters' reasoning rests on the governor's account alone. It is unlikely that the RBA raises the cash rate above 4.85 percent at its December 2026 meeting, announced by December 16. The hold case is fragile: the RBA forecasts inflation above 3 percent for the coming year and unemployment rising to 5.1 percent by late 2028, and Bullock kept further hikes open. The dropped bias may instead reflect dissent rather than policy change, and sticky inflation, oil prices and AI-driven investment may compel a February 2027 hike. A December hold lets lenders, Australian dollar traders and bond desks price a plateau near 4.85 percent, while a surprise hike would force repricing of variable-rate loans and deepen the housing downturn.

6 sources

Statement by the Monetary Policy Board: Monetary Policy Decision - Reserve Bank of Australia
Australias central bank lifts rates to 18-year high split vote points to pause ahead - KELO/Reuters
RBA's Cup Day call takes rates to 18-year high; board divided over decision — as it happened - SBS News
RBA lifts interest rates to highest level in 18 years to try to dampen inflation - ABC News (Australia)
Interest rates live updates: RBA hikes cash rate to 18-year high of 4.85 per cent - ABC News (Australia)
Reserve Bank of Australia (RBA) 25bp rate hike, as widely expected - InvestingLive