Australia’s central bank lifts rates to 18-year high of 4.85%
Markets are wagering the RBA will be on hold in December
The Reserve Bank of Australia (RBA) increased its cash rate to an 18-year high of 4.85% on Tuesday, November 3, during its fifth rate hike of the year. However, the decision was more narrow than anticipated, with three out of nine board members preferring to maintain the rates. The RBA stated that it would continue to take measures necessary to bring inflation back to target.
The Australian dollar declined by 0.3% to US$0.6979, while three-year government bond futures dropped 3 ticks to 95.14. Economists polled by Reuters had expected a hike, but markets implied an 88% chance of a rate change following strong inflation data and hawkish policy statements. The RBA's tightening has reversed 75 basis points of easing from 2025, positioning Australia as one of the most hawkish central banks among developed nations.
Australia's economy, already experiencing a slowdown under higher borrowing costs, is expected to face a more challenging outcome, possibly even a recession, given the need to bring inflation back to target.
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