Published:
Statement by the Monetary Policy Board: Monetary Policy Decision — 3 November 2026
RBA increases the cash rate target by 25bp to 4.85%; inflation remains broadly based with forecasts revised materially higher and expected to stay above 3% through much of 2027, not back in the 2–3% range until late 2027.
The Reserve Bank of Australia increased the cash rate target by 25 basis points to 4.85% at its 3 November meeting. The Board said inflation is still elevated and broadly based, with updated staff forecasts revising the inflation outlook materially higher. It pointed in part to higher fuel and other commodity prices affected by the conflict in the Middle East, but also to domestic capacity pressures that it judges are a little tighter than previously thought.
The RBA also highlighted ongoing inflation pressure linked to AI-related investment. It noted that rapid growth in prices for technology-related goods is contributing to higher inflation across a range of goods and services, and that liaison indicates many firms are facing cost pressures and either raising prices or looking to do so. In the Board’s forecast, inflation is expected to remain elevated through much of 2027 and to not return to the top of the 2–3% target range until late 2027—around three quarters later than previously forecast—raising the risk that inflation expectations drift upward.
The statement ties the decision to financial conditions and the outlook for demand. It says higher cash rate increases since the start of the year have tightened financial conditions, while the economy is slowing: housing prices have fallen significantly and unemployment has risen. The forecasts expect further slowing in growth, with weaker dwelling investment and household consumption as higher interest rates and falling housing turnover weigh, though business investment is forecast to be stronger in the near term (including data-centre-related investment). The RBA also stressed heightened uncertainty around domestic activity and inflation, including scenarios where Middle East-linked risks deliver higher inflation with lower activity.
For FX context, the key watch items are whether upcoming data reinforce the “inflation elevated through 2027” profile and the risk that expectations become embedded, versus whether slower growth and a rise in unemployment begin to cool broader price pressures.
Why this matters for FX
This is a direct update to Australian policy expectations and the interest-rate differential. The RBA explicitly cites a materially higher inflation outlook, tighter-than-previously-estimated capacity pressures, and pass-through from higher fuel/commodity prices linked to the Middle East conflict, alongside stronger AI-related prices. It also states that recent rate increases have tightened financial conditions and will keep them tighter to support a return to target, which can support the AUD by lifting the expected path of policy rates relative to other currencies, even as it acknowledges growth is slowing and unemployment is expected to rise.