4 November 2026: The Reserve Bank of Australia (RBA) raised interest rates for the fifth time this year on Tuesday, lifting its cash rate to the highest level in 18 years. But the Australian dollar fell after the decision, because the Board was split on the move.
Key points:
- The RBA raised the cash rate target by 0.25% to 4.85%, from 4.60%.
- It is the highest cash rate since late 2008 and the fifth increase of 2026.
- The decision was a 6–3 majority: three members voted to keep rates unchanged.
- The Australian dollar fell about 0.3% to around 69.76 US cents after the announcement.
- The next RBA decision is due on 8 December.
Why the RBA raised rates
Inflation in Australia has stayed above the RBA’s 2%–3% target band. Core inflation rose to 3.6%, and RBA Governor Michele Bullock had warned that higher energy prices linked to renewed conflict in the Middle East meant inflation would run above the bank’s earlier forecasts. Ahead of the meeting, Bullock had described a move as a form of insurance against inflation staying high for longer.
Why the Australian dollar fell
Currency markets often react more to the message than the move itself. The hike was widely expected, but the three dissenting votes suggested that some Board members believe rates may already be high enough. Traders read this as a sign that another immediate hike is less likely, and the Australian dollar slipped against the US dollar.
What the RBA expects next
The RBA’s updated forecasts assume the cash rate peaks at around 4.9% by mid-2027, before easing slightly in 2028. In other words, the bank has left the door open to further increases if inflation does not slow, but the split vote has lowered expectations of a hike in December.
What it means for AUD/USD traders
- Interest rate differentials: with the US Federal Reserve also in a hiking cycle, the gap between Australian and US rates matters for AUD/USD. Read how interest rates move forex markets.
- Data to watch: Australian inflation and jobs figures, Chinese economic data, and commodity prices all influence the Australian dollar.
- Global risk mood: the Australian dollar tends to weaken when investors become more cautious.
- Event risk: central bank decisions can cause sharp moves and wider spreads. Use small positions and a stop-loss. See our risk management checklist.
Mortgage holders in Australia now face higher repayments, which could weigh on consumer spending in coming months, a factor the RBA will watch closely.
Risk warning: Trading forex, CFDs and other leveraged products carries a high level of risk, and you could lose money rapidly. Market figures in this article are based on reports available at the time of writing and may change. This article is for information only and is not investment advice.
Sources
- Reserve Bank of Australia: Monetary Policy Decision statement
- ABC News: RBA lifts interest rates to highest level in 18 years
- RBA: Statement on Monetary Policy, November 2026
- InvestingLive: Bullock on the oil shock and inflation