Reserve Bank of Australia (RBA) Governor Michele Bullock is addressing the press conference, explaining the reason behind raising the key interest rate by 25 basis points (bps) to 4.85% from 4.60% in the November policy meeting.
Key quotes from the RBA press conference
Rate increase was necessary to reduce inflation.
Growth must stay muted, unemployment to climb more.
Some hardship now will avoid more pain later.
Voters favoring pause perceived greater downside risks.
Those favoring a hold wanted to wait longer for data.
Inflation is largely set for the next year.
Not an ideal situation to be in.
Probably best to pause and assess incoming data.
Monetary policy will be effective, requires time to take effect.
Unemployment remains relatively low, job growth continues.
Don’t see economy weakening at this point.
Those on hold weren’t dismissing a hike but wanted additional data.
No intention to push economy into recession.
No wage price spiral expected.
A$ has tracked interest differentials, pass-through to import prices delayed.
This increase might not suffice, but it's less evident.
Not definitely hiking rates again, preserving options.
Uncertain how high rates must rise.
Board makes policy choices, not trying to shape expectations.
No forward guidance, market to interpret.
This section below was published at 03:30 GMT to cover the Reserve Bank of Australia's monetary policy announcements and the initial market reaction.
The Reserve Bank of Australia (RBA) announced on Tuesday that it raised the Official Cash Rate (OCR) by 25 basis points (bps) to 4.85% from 4.60% after concluding its November monetary policy meeting. The decision aligned with the market expectations.
This is the the RBA fifth interest rate hike of 2026, its highest level in 18 years.
Summary of the RBA Monetary Policy Statement
With revised inflation outlook and ongoing upside risks, board decides further tightening of financial conditions is necessary to support inflation return to target.
Cash rate target hikes since start of year have tightened financial conditions.
AI-related spending fuels sharp rise in tech goods prices, many goods and services see persistent inflation.
Inflation now expected to stay above 3% for next year with rising risk of entrenched higher inflation expectations.
Capacity constraints seem slightly tighter than earlier thought, with signs that increased fuel costs are being reflected in prices of other goods and services.
Forecasts show output growth slowing further over the coming year, easing capacity pressures and aiding inflation return to target.
Unemployment rate forecast to increase more than expected in August projections.
Growth in Australia's key trading partners has exceeded expectations as AI investment boost offsets Middle East conflict impact.
RBA’s Statement on Monetary Policy
RBA forecasts GDP growth of 1.6% in Q4 2026, 1.6% in Q2 2027, 1.3% in Q4 2027, 1.5% in Q4 2028.
RBA forecasts unemployment at 4.7% in Q4 2026, 4.8% in Q2 2027, 4.9% in Q4 2027, 5.1% in Q4 2028.
Cash rate expected above average 4.7% in Q4 2026, 4.9% in Q2 2027, 4.8% in Q4 2027, 4.8% in Q4 2028.
RBA forecasts CPI at 4.5% in Q4 2026, 3.7% in Q2 2027, 2.7% in Q4 2027, 2.4% in Q4 2028.
RBA lifts near-term GDP forecasts on data centre investments, lowers long-term outlook.
Forecasts trimmed mean CPI at 3.6% in Q4 2026, 3.5% in Q2 2027, 2.9% in Q4 2027, 2.6% in Q4 2028.
AUD/USD reaction to the RBA interest rate decision
The Australian Dollar attracts some sellers in an immediate reaction to the RBA’s decision. At the time of writing, the AUD/USD pair is down 0.20% on the day at 0.6980.
Australian Dollar Price This week
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the weakest against the Swiss Franc.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section below was published on October 2 at 23:30 GMT as a preview of the Reserve Bank of Australia's monetary policy announcements.
- 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.”
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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.
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