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RBA poised for fifth 2026 rate rise as inflation remains high

Last updated 1h ago

Australia’s central bank is expected to raise interest rates at its November meeting, which is scheduled to conclude Tuesday, as policymakers confront stubborn inflation. A further increase would be the fifth this year and add to pressure on households and borrowers already facing higher living costs.12

TL;DR

  • The expected fifth increase reflects continued concern about inflation, with the September headline rate accelerating from August.25
  • Markets strongly favour an exact quarter-point November rise, but price a much lower chance of the same-sized move in December, leaving the path beyond this meeting less certain.M3M5
  • The debate includes who bears the burden of inflation control: Oliver has proposed fiscal restraint or higher taxes alongside rate rises, while warning that some borrowers may struggle with further increases.24

Still to come

  • The RBA’s November meeting is due to conclude Tuesday, when the board’s decision will show whether it delivers the widely expected fifth rate rise of the year. The decision also matters for the debate over whether further tightening may follow, a question raised by Commonwealth Bank economists and Bloomberg’s coverage.

The Australian Bureau of Statistics reported that headline inflation reached 4.3% in the 12 months to September, up from 4.0% in August. The increase strengthened expectations of another rate rise ahead of the Reserve Bank of Australia’s meeting. Bloomberg reported that almost all economists it surveyed expected a 25-basis-point increase, which would take the cash rate to 4.85%, while Commonwealth Bank economists also forecast a quarter-point rise.235

Prediction-market pricing on November 2 put the odds of an exactly 25-basis-point increase at about 92%. That is a strong expectation for the specific quarter-point outcome, not a price for any possible increase. A separate market put the odds of an exactly 25-basis-point rise at the December meeting at about 21%, suggesting the expectation of another move is much less settled beyond November.M3M5

The consequences extend beyond the rate decision. AMP chief economist Shane Oliver warned that higher repayments could push some mortgage holders into difficulty. Oliver also argued that governments could help counter inflation by reducing spending or raising taxes, including through a proposed 1% levy on income. Those are his policy suggestions, not announced government measures.24

The inflation picture also includes underlying price pressure: Commonwealth Bank said quarterly consumer prices rose 1.0% and annual trimmed-mean inflation was 3.7%. Governor Michele Bullock told a Senate committee that some inflation risks identified in the RBA’s August forecasts had materialised or were developing, and that inflation would likely be higher than the bank’s earlier base case.5

Sources

  1. Australia Set for Fifth Rate Hike as Inflation Fight Intensifies · Bloomberg Business · Nov 1
  2. Australians brace for rate rise as housing and fuel costs push inflation to 4.3 per cent · 7NEWS
  3. Australia’s Reserve Bank Tipped to Hike Rates Again As Inflation Remains Stubborn · Bloomberg
  4. Inflation: Unpopular policies could be what’s needed to counteract Reserve Bank of Australia rate rises · nine.com.au
  5. CommBank economists forecast November RBA rate hike as inflation risks build · CommBank

AI-generated from the linked reporting and prediction-market data. Market prices reflect traders’ expectations and can change.

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