Australia: Reserve Bank lifts cash rate to 4.85% in split 6-3 vote, 3 November 2026

On 3 November 2026, the Reserve Bank of Australia raised its cash rate target by 25 basis points, from 4.60 per cent to 4.85 per cent, with the new target applying from 4 November 2026. It is the fifth rise this year, and it reaches borrowers and savers across Australia through the rates banks go on to set.

What happened

Six members of the Monetary Policy Board voted for the increase and three voted to hold at 4.60 per cent, a split the Reserve Bank recorded in its Statement by the Monetary Policy Board: Monetary Policy Decision on 3 November 2026. At 4.85 per cent the cash rate stands at its highest since late 2008, and Reuters put the year's five rises together at 125 basis points of tightening.

The September quarter figures explain the timing. Headline inflation was 4.3 per cent over the year to September on the monthly indicator, according to the ABS, while the quarterly trimmed mean was 3.7 per cent over the year to the September quarter, up 1.0 per cent in the quarter. Both sit above the Reserve Bank's 2 to 3 per cent target range.

Why the Board moved

Inflation, in the Board's words, remains elevated and broadly based, and its outlook has been revised materially higher in the updated staff forecasts. Fuel and other commodity prices, pushed up by the conflict in the Middle East, play a part, as do domestic capacity pressures judged a little tighter than earlier thought and rapid growth in prices for technology-related goods driven by AI-related investment.

The forecast now has inflation staying elevated through much of 2027, above 3 per cent for the coming year, and only reaching the top of the 2 to 3 per cent target range in late 2027, around three quarters later than previously forecast. With that outlook, and an increasing risk that higher inflation expectations become embedded, the Board judged that a further tightening in financial conditions was warranted. It weighed that against a slowing economy, housing prices that have fallen significantly, and an unemployment rate that has risen, with higher rates and weaker housing turnover expected to weigh on dwelling investment and household consumption.

What it means in general terms

The cash rate is the rate the Reserve Bank sets for overnight lending between banks, and it feeds through to the rates banks charge and pay, so a rise tends to push variable loan rates up when lenders pass it on, and deposit rates can also move up over time. Fixed-rate borrowers feel nothing until their fixed term ends. The cash rate itself is not a mortgage rate, and each lender decides whether to pass a change on, by how much, and from when.

The split vote is the part markets seized on. Reuters reported that the Board dropped a reference to increasing the cash rate further if needed, and that markets moved to bet on a hold at the December meeting. Markets read it that way. The Board said it will continue to do what it considers necessary to bring inflation sustainably back to target, guided by the data.

What happens next

Minutes of the November meeting are due on 17 November 2026, and the Board's final decision for the year falls on 8 December 2026. In the meantime, the rates people actually pay and receive will be set by lender announcements in the days after the decision, so those announcements are the ones to watch.