RBA Hikes to 4.85%: Is This the Last Rate Rise of 2026?

Key Takeaways

• Rates hit 4.85%. The fifth increase of 2026 takes the cash rate to its highest level since 2008.

• Inflation remains stubborn. Headline inflation reached 4.3% in September, with underlying inflation at 3.6%, both above the RBA's 2–3% target.

• Markets expect a December pause. Futures pricing suggests markets expect no further hike in December, although the outlook remains data-dependent.

• Borrowers face more pressure, savers benefit. Higher rates increase mortgage costs but support returns on savings deposits.

Inflation Forces the RBA's Hand

The RBA has raised the cash rate to 4.85%, following another disappointing inflation report. September figures showed headline inflation climbing to 4.3% and underlying inflation rising to 3.6%.

Higher energy costs have contributed to the increase, but persistent domestic price pressures and resilient demand suggest inflation may take longer to return to target than hoped.

For the RBA, the challenge is bringing inflation under control without unnecessarily weakening an economy already feeling the effects of higher rates, with unemployment rising to 4.7% in September.

Is This the Last Rate Rise of 2026?

Financial markets appear to think so. Ahead of Tuesday’s decision, the market pricing implied a high likelihood of a hike, and that the Bank would then hold in December.

That doesn't mean further tightening is off the table. While markets expect the RBA to hold in December, pricing still implies a meaningful chance of another increase by mid-2027, and the RBA gave no signal that the cycle is over, saying only that it will remain attentive to the data and do what is necessary to bring inflation back to target. The first meeting for the RBA in 2027 comes in February.

What It Means for Borrowers, Savers and Investors

For households with a mortgage, the practical effect is another lift in repayments, adding to what has already been a demanding year — and it helps explain why consumer confidence has slumped and house prices have been falling. For savers, though, there is a silver lining: cash and term deposits are paying their most attractive rates in years, and bonds are offering solid income too. More broadly, higher rates could be a headwind for the rate-sensitive parts of the share market, such as property trusts and high-growth stocks, even as the market overall has held up.

Looking Ahead

While Australia's inflation outlook will remain central to the RBA's next decision, investors also have a busy global calendar to navigate.

In the US, corporate earnings season is in full swing, with results from major technology and consumer companies providing an important test of whether earnings growth can justify elevated share-market valuations. Investors will be watching closely for signs of resilient consumer demand, corporate profitability and continued spending on artificial intelligence.

Meanwhile, the US midterm elections take place on 3 November, coinciding with the RBA's decision. The results will determine control of Congress and could influence expectations for US fiscal policy, regulation and trade. With US markets playing such a significant role in global portfolios, developments overseas may prove just as important for Australian investors as the RBA's next move.

Closer to home, the November inflation release and labour market data will be key to whether the RBA can pause in December or needs to tighten policy further.

Key Dates to Watch

• 4 November — US midterm elections: Results will determine the balance of power in Congress and could influence expectations for US economic policy.

• Early November — US corporate earnings: AMD has reported, with Qualcomm and Airbnb also due this week, offering insights into consumer spending, corporate profitability and AI investment.

• 19 November — Australian jobs data: Employment and unemployment figures will help show whether higher rates are cooling the economy.

• 25 November — October inflation data: A crucial reading on whether price pressures are easing enough to support an RBA pause.

• 8 December — Next RBA decision: The Bank's final scheduled interest rate decision of 2026, informed by the economic data released in the meantime.