RBA November Rate Decision: The 4.85% Hike Is Priced In, the Next Move Is Not
At 2:30pm Sydney time today, the Reserve Bank of Australia will announce a decision that almost nobody expects to be a surprise. All four of Australia's major banks expect the cash rate to rise by 25 basis points, from 4.60% to 4.85%, and markets have priced roughly an 87% chance of exactly that outcome. If it happens, it will be the fifth increase of 2026, following rises in February, March, May and September, and it will take Australian rates to their highest level since 2008. The interesting part of today is therefore not the decision itself. It is everything that comes with it: the updated forecasts in the Statement on Monetary Policy, published at the same time, and Governor Michele Bullock's press conference an hour later. Those will tell us whether November is the end of this tightening cycle or merely the latest step in a longer one.
The case for today's hike hardened quickly. September inflation came in at 4.3% over the year, up from 4.0% in August, and the trimmed mean — the RBA's preferred measure of underlying inflation — rose 1.0% in the quarter, against the bank's own August forecast of 0.8%. Inflation expectations have also drifted up in recent months, which matters to a central bank because expected inflation has a habit of becoming actual inflation when workers and firms set wages and prices. The Melbourne Institute's economists put it bluntly ahead of the meeting: with both headline and underlying inflation well above the top of the target band, the likelihood of a further increase is high. Unemployment, at 4.7%, has not deteriorated enough to argue otherwise.
What makes this cycle unusual is how thoroughly the consensus has flipped. As recently as the start of August, the big banks' economists expected the cash rate to stay at 4.35% and cuts to begin in 2027. Instead the bank has now raised four times this year, and the September quarter's inflation print moved market pricing for a November rise from below 20% in mid-October to around 85% to 87%. That is a fast repricing, and it carries a warning: a central bank that has been surprised by inflation four times in a year may not stop at the first forecast it gets right.
That is where the disagreement now sits, and it is a genuine split rather than a difference of emphasis. Commonwealth Bank and NAB expect a hike today followed by an extended hold, with CBA still pencilling in two cuts during 2027. Westpac agrees November is likely but says the risk of another rise, most likely in February, has increased. UBS goes further, judging two more rises, to 5.10%, more likely than none. Futures markets sit roughly in the middle, putting about even odds on a second rise by mid-2027. In other words, everyone agrees on today; nobody agrees on what today means.
My reading is that the hawks have the better of this argument, though not by much. The RBA has already shown it will move when the inflation data forces its hand, and the data that forced today's move — a hot quarterly trimmed mean, rising expectations, fuel prices feeding through — does not obviously cool by February. Against that, the cumulative weight of thirteen increases since May 2022 is real: CBA's own economists warn of weaker growth, softer house prices and rising unemployment as the lagged effects bite, and a central bank that hikes into a slowing economy risks having to reverse course in public. The balance of those forces is why I put the chance of at least one more rise by the February meeting at 45% — close to the market's even odds, but tilted slightly toward restraint because the RBA will want to see the October labour force figures and the October monthly CPI, both due before December, before committing to a path.
There is a second reason to watch today's forecasts rather than just the rate. If the Statement on Monetary Policy lifts the inflation path and pushes the return to target further out, that is the bank telling households the squeeze lasts longer, whatever it does in December. If instead it holds the line on its forecasts while hiking, it is signalling that this move is insurance, not the start of a run. The Aussie dollar, which gave back its gain within the hour after the September hike, will likely trade on that guidance rather than on the 25 basis points themselves.
By this evening, then, Australia will probably have its highest cash rate in eighteen years, and the least interesting question in monetary policy will have been answered. The one worth tracking is whether November was the last hike or the second-to-last. I think the odds slightly favour restraint after today — but only slightly, and the inflation data has made a habit of embarrassing that kind of confidence.