RBA cash rate hike lifts target to 4.85%

Australia's central bank tightened again despite a divided board. The RBA cash rate hike of 25 basis points takes the cash rate to 4.85%, with six members preferring the rise and three arguing to hold at 4.60% as inflation stays sticky across goods and services.

What happened

The Reserve Bank of Australia's official statement said inflation remains elevated and broadly based, pointing to Middle East energy effects and AI-related tech-goods inflation among the pressures keeping prices sticky. Officials do not expect inflation to reach the top of the 2–3% target band until late 2027, a timeline that keeps the majority wary of pausing too soon.

ABC's markets live blog said NAB and CBA will pass the 0.25 percentage-point increase through to variable mortgages from November 13. Westpac's Luci Ellis, as quoted in the same live coverage, sees a December pause as likely after the split vote, giving households a clearer near-term map even as the level of the cash rate resets higher.

The decision sits in a global rates tape where several peers have already moved or held in contested votes, so Australia's 6-3 split will be read as evidence the tightening cycle is late-stage rather than freshly hawkish for its own sake. Still, another quarter-point step at 4.85% is restrictive for mortgage-heavy balance sheets.

Front-end rates and the Australian dollar will now parse whether the dissenters can swing a hold next month or whether another inflation miss forces the majority to move again before Christmas.

Why it matters

Household cash-flow maths tighten immediately once the big banks pass the move after the RBA cash rate hike. Mortgage pricing is the transmission channel that matters for consumer spending into Christmas, which is why the November 13 effective date on variable loans is the first market marker after the statement and why retail sales will be watched into December.

The dissent also shapes expectations. A three-member hold camp gives traders cover to fade another hike in December even while the majority still worries that inflation will miss the band's top until late 2027. That gap between the vote and the inflation forecast is the story for swap desks.

Cross-country comparison helps. Our Bank of Canada hike coverage tracked another developed-market board debating whether sticky services and goods prices still justify more restriction, while the RBNZ surprise hold showed how a split can freeze a cycle overnight when doves dig in.

For FX and rates desks, yield differentials versus the U.S. and New Zealand will stay in focus until markets become convinced the December pause Ellis flagged is the modal path. A firmer Aussie on the hike can fade quickly if December is fully priced as a hold.

Energy and AI-goods inflation cited in the statement also keep the RBA linked to global themes rather than a purely domestic wages story, which matters for how foreign accounts hedge AUD exposure after the vote.

What's next

The next decision meeting and any updated forecasts will show whether the three dissenters gain ground. The RBA's media release is the primary source for the 4.85% target, the 6-3 vote split and the late-2027 inflation timeline.

Watch mortgage pass-through on November 13 and whether December guidance softens after this RBA cash rate hike, especially if labour and CPI prints cool into the blackout.

Inflation prints that fail to cool into early 2027 would reopen the case for another step even after a pause, keeping the 4.85% level from feeling like a terminal rate just yet.