What happened
The Reserve Bank of Australia (RBA) raised its cash rate target by 25 basis points to 4.85% at its meeting on 3 November 2026. A basis point is one hundredth of a percentage point, so 25 basis points is 0.25 percentage point. The cash rate is the benchmark interest rate that influences borrowing and saving rates across the economy.
The decision was not unanimous. Six members of the Monetary Policy Board voted for the increase, while three voted to leave the rate unchanged at 4.60%.
Why the RBA moved
The Board said inflation remains elevated and broadly based, and that its staff forecasts for inflation have been revised materially higher. It pointed to higher fuel and other commodity prices linked to the conflict in the Middle East, and to domestic capacity pressures that look a little tighter than earlier thought. It also said AI-related investment is pushing up prices for technology-related goods.
Inflation is now forecast to stay elevated through much of 2027. The RBA does not expect it to reach the top of the 2–3% target range until late 2027, around three quarters later than it previously forecast. The Board said it sees an increasing risk that higher inflation expectations become embedded.
Given that outlook and the risks that remain on the upside, the Board concluded that borrowing conditions need to become tighter still if inflation is to return to target.
What it means for you
A higher cash rate generally raises the cost of borrowing for Australian households and businesses. The RBA noted that rate increases since the start of the year have already tightened financial conditions, with the economy slowing, housing prices falling significantly and the unemployment rate rising.
The RBA expects growth to slow further over the coming year, and projects unemployment to rise by more than it forecast in August. It said it will be guided by incoming data and its assessment of risks. For Indians with Australian loans, savings or property, the Board’s statement does not say how individual lenders will pass on the change.
Background
The Board said uncertainty remains high. The Middle East conflict is unresolved and global oil supply disruptions are keeping upward pressure on energy prices. Growth in Australia’s major trading partners has so far been stronger than expected, as AI-related investment has outweighed the conflict’s effects. Weak productivity growth continues to limit Australia’s potential growth.
