Full Breakdown
RBA Poised to Raise Cash Rate to 4.6%, Highest Since 2011
By Drooid · · How we work
Core Event
The Reserve Bank of Australia (RBA) board is expected to increase the cash rate from 4.35 % to 4.6 % at its Tuesday meeting. The move would mark the fourth rate rise in 2026 and the highest benchmark borrowing rate since November 2011.
Background & Context
Inflation has remained above the RBA’s 3 % target band for more than five years, prompting officials to shift from a post-COVID “wait-and-see” stance to a more aggressive tightening approach. Recent spikes in fuel prices, higher oil costs linked to the U.S. war on Iran, and a surge in AI-driven investment are adding to excess demand. Internationally, the U.S. Federal Reserve, the European Central Bank and the Bank of Japan have all raised rates, reinforcing market expectations that the RBA will act now rather than await the August CPI release on Wednesday or the September-quarter figures due on October 28.
Data & Statistics
- A typical new mortgage of AU$731,000 at a 6.2 % rate would see monthly repayments rise by about AU$119, bringing the total increase since January to nearly AU$480.
- The trimmed-mean inflation measure, closely watched by the RBA, is projected to stay at 3.6 %.
- S&P/ASX200 futures were flat, while the benchmark index fell 0.43 % to 8,665, its lowest level since June 11.
- Market pricing indicates the hike is almost fully priced in, and analysts anticipate a possible follow-up increase in November if September-quarter data confirm persistent inflation.
Official Statements & Responses
Senior RBA staff have warned that households may be beginning to expect inflation to stay high, reducing confidence in the bank’s ability to achieve its target. Governor Michele Bullock and other senior officials have signaled a willingness to prioritize price stability over labour-market concerns. Morgan Stanley’s Chris Read expects a unanimous board vote for the hike, describing it as a shift from the earlier, more cautious approach.
Verbatim Quotes
- “After more than five years of inflation being above target, threatening RBA credibility, it does not have the luxury of continuing to wait and assess,” — Middle East. Shane Oliver, AMP’s chief economist
