EVEST Academy
    ForexTuesday, 3 November 2026 at 02:30

    RBA Expected to Hike Official Cash Rate to 4.85% to Tame Inflation

    Financial markets are pricing in an interest rate hike by the Reserve Bank of Australia to 4.85%. Persistent inflation pressures and a resilient domestic economy keep the central bank on an aggressive monetary tightening path.

    Key points

    • Market consensus expects the RBA to raise the policy interest rate to 4.85%.
    • Persistent services inflation and resilient labor conditions underpin the hawkish stance.
    • Forward guidance will be critical to determine whether 4.85% marks the terminal interest rate.

    Market expectations have solidified around the Reserve Bank of Australia (RBA) lifting its official cash rate to 4.85%. The anticipated move comes as policymakers grapple with stubborn inflationary forces that remain stubbornly above the central bank’s target band.

    Context and background

    While several global central banks have initiated or contemplated easing cycles, Australia's macroeconomic backdrop has presented unique challenges. Sustained price increases in non-tradable goods, coupled with a tight labor market and persistent wage growth, have prevented domestic inflation from cooling at the desired pace. The RBA's mandate to anchor long-term inflation expectations between 2% and 3% has compelled policymakers to consider keeping rates restrictive, even at the risk of dampening domestic economic momentum.

    Why it matters to traders

    For currency and commodities traders following market developments via EVEST Academy, this potential rate decision carries significant trading implications:

    • Yield Differentials: A cash rate of 4.85% enhances the yield appeal of the Australian dollar, altering cross-border capital flows especially against lower-yielding funding currencies.
    • Forward Guidance: Traders will dissect the accompanying monetary statement to ascertain whether the RBA views 4.85% as the terminal rate or if further tightening remains on the table.
    • Equity Headwinds: Higher borrowing costs typically exert downward pressure on Australian domestic equities, notably real estate investment trusts (REITs) and high-multiple growth shares on the ASX.

    Market impact

    A rate hike to 4.85% should provide bullish momentum for the Australian Dollar (AUD), particularly in pairs like AUDUSD and cross pairs such as AUDJPY and AUDNZD. Conversely, the ASX 200 index could experience short-term weakness due to rising corporate capital costs and consumer headwinds. Key elements to monitor include the RBA's post-meeting statement, any shifts in inflation forecasts, and subsequent quarterly GDP prints to assess whether consumer spending is buckling under higher rates.

    Affected assets:
    AUDUSD
    AUDJPY
    ASX 200
    Australian Government Bonds
    Original source

    FXStreet — RBA expected to raise interest rate to 4.85%

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    This brief was independently written by the EVEST Academy team for educational purposes only and is not investment advice. Leveraged trading carries a high level of risk and may result in loss of capital.

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