RBA expected to raise interest rate to 4.85%
- The Reserve Bank of Australia is set to raise the interest rate to 4.85% in November.
- RBA Governor Michele Bullock noted upside risks to inflation have materialized.
- The Australian Dollar is weak ahead of the announcement despite a better market mood.
The Reserve Bank of Australia (RBA) will announce its monetary policy decision on Tuesday and is widely anticipated to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 4.85% from 4.6%. If the RBA delivers as expected, it will be the fifth interest rate hike of 2026, and the OCR will hit an 18-year high.
The decision will be announced at 03:30 GMT, accompanied by the Monetary Policy Statement, and followed by RBA Governor Michele Bullock’s press conference at 04:30 GMT.
Ahead of the announcement, the Australian Dollar (AUD) struggles to retain the 0.7000 mark against the US Dollar (USD).
Focus stays on inflation
Continued inflationary pressures are behind rate hikes in 2026, and Australia is no exception. In fact, the RBA hiked the OCR for the first time in February, before the Middle East war hit global energy prices. As previously noted, the central bank already delivered four hikes, yet, according to the latest available data, Australia’s annual inflation rate stood at 3.9% in Q3, well above the central bank’s 2–3% goal. Additionally, the RBA’s preferred gauge, the core Trimmed Mean Consumer Price Index (CPI), accelerated to 3.7% year-on-year, up from 3.6% in Q2.
RBA Governor Bullock recently appeared before Parliament and noted that “Some of the international and domestic upside risks to inflation have materialized or are materializing.”
“It’s important for the economy that inflation does not diverge from the target for too long,” Bullock added, “since that risks it becoming embedded in inflation expectations, which feeds through to price and wage setting decisions.”
Hot inflation, alongside Bullock’s words, pretty much calls for a rate hike at the Board's meeting. Yet, with a rate hike already priced in, the focus will shift to the press conference led by Governor Bullock, and any hint she gives about what’s next in monetary policy. Bullock is likely to retain her hawkish tone and leave the door open for additional hikes, pushing AUD higher.
How will the Reserve Bank of Australia’s decision impact AUD/USD?
If the RBA delivers the anticipated 25 bps rate hike, the Aussie is likely to find near-term support, although gains will depend on how hawkish the accompanying statement and Governor Bullock’s words are. A larger-than-anticipated hike could trigger a near-term AUD rally, supported by a risk-on mood ahead of the announcement and a weaker Greenback. An on-hold decision is unlikely, but such a move would see the AUD plummeting.
Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD pair is at risk of falling. On the daily chart, the pair found resistance at the start of the week around a flat 100-day Simple Moving Average (SMA) at 0.7030, the immediate resistance level. Last week’s peak at 0.7067 comes next, with the 200-day SMA a handful of pips below the level and also attracting sellers. The same chart shows technical indicators turning south, although holding above their midlines, reflecting the ongoing weakness but falling short of anticipating a steeper decline ahead.”
Bednarik adds: “A slide below 0.6990 will likely trigger additional slides as buyers will be more keen to give up. The slide, then, could extend towards the 0.6640 region. On the contrary, steady gains beyond 0.7070 could end with the pair re-conquering the 0.7100 mark.”
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Economic Indicator
RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Next release: Tue Nov 03, 2026 03:30
Frequency: Irregular
Consensus: 4.85%
Previous: 4.6%
Source: Reserve Bank of Australia
Artigos Recomendados
