With the 3 November increase to 4.85%, the Reserve Bank has added 125 basis points to the cash rate target over five moves in 2026 – and the RBA says financial conditions are now restrictive.

One hundred and twenty-five basis points. That is how far the cash rate target has risen across 2026, after the Monetary Policy Board added another 25 basis points on Tuesday 3 November. It is a figure worth pausing on, because it captures not just one decision but a year-long campaign against Inflation that has kept surprising on the upside.

Counting the moves

The RBA's homepage now shows a cash rate target of 4.85%, effective 4 November 2026. That follows an increase to 4.60% that took effect on 30 September 2026.

Officials have tallied the year as they went. Deputy Governor Andrew Hauser, speaking on 21 October, listed the February, March and May increases before September's. Assistant Governor Sarah Hunter referred on 25 October to "four rate hikes this year". Governor Michele Bullock told the Senate Economics Legislation Committee on 28 October that the cumulative increase was 100 basis points.

The running total now reads:

  • Before 3 November: four increases, 100 basis points
  • 3 November: one increase, 25 basis points
  • 2026 total: five increases, 125 basis points

The latest move was not unanimous. Six Board members voted to raise and three voted to hold at 4.60%, a contrast with September's unanimous decision.

Australia was early to this cycle. "We were the first G20 central bank, as you know, to raise rates this year," Hauser said, adding that fourteen other G20 central banks have also raised rates.

Where 4.85% sits

How tight is a 4.85% cash rate? The RBA's answer, in the November Statement on Monetary Policy, is direct: "Financial conditions are judged to be restrictive."

There is less certainty about exactly how restrictive. Assistant Governor Christopher Kent noted on 19 October that the cash rate and its expected path sat at the upper end of the range of neutral estimates – the level at which policy neither stimulates nor restrains the economy. Asked about the neutral rate, he said: "Well, I would dispute that we know where it is now."

The SMP's forecasts assume a cash rate path drawn from market pricing as at 28 October, averaging 4.7% in 2026, 4.9% in 2026/27 and 4.8% in each of 2027, 2027/28 and 2028. That is an assumption for forecasting purposes, not a pledge from the Board.

Why 125 points have not yet been enough

If rates have risen this much, why is inflation still high? The RBA's statement offers several reasons. "Inflation remains elevated and recent data indicate that it is broadly based," it says, pointing to higher fuel and Commodity prices tied to the Middle East conflict, capacity pressures and AI-related Investment lifting technology goods prices.

The latest data, from the RBA's inflation pages, show monthly headline CPI at 4.3% in the year to September 2026, up from 3.5% in July. Underlying inflation, measured by the trimmed mean, was 3.7% over the year to the September quarter and 1.0% in that quarter. These are distinct measures; both remain above the 2–3% target.

The forecasts have moved the wrong way too. The SMP now sees headline inflation at 4.5% over the year to December 2026, against 3.6% in August, and trimmed mean inflation at 3.6%, against 3.3%. On these forecasts, inflation stays above 3% through much of 2027, with the December 2027 figures at 2.7% for headline and 2.9% for the trimmed mean.

Hauser has also pointed to a slower-growing economy on the Supply side: the RBA cut its underlying productivity growth assumption from 1% to 0.7%. And oil above $100 a barrel, about a third higher than the August assumption, has added to price pressures.

What the tightening is doing

Monetary policy works through several channels, and the RBA has offered evidence on a few.

The Exchange Rate is one. Hauser noted that some RBA models attribute up to two-thirds of the effect of interest rates to the exchange-rate channel. The September minutes recorded that the trade-weighted Australian dollar was about 5% higher year-to-date. As at 4.00 pm on 2 November, the AUD/USD stood at 0.7023 and the trade-weighted index at 65.1. Kent made the link to fuel prices: "Australians don't pay US dollars at the pump for their oil prices. They pay Aussie dollars."

Housing is another. The decision statement says "housing prices have fallen significantly", and expects "Higher interest rates and falls in housing prices and turnover" to weigh on growth. Bullock noted on 28 October that housing prices remained around 50% above early 2020 levels, while stressing that "monetary policy does not target housing prices."

Households feel it directly. Before November's move, the September minutes put scheduled Mortgage payments at about 10% of household disposable income, around their 2024 peak. Hauser cited about 2% of mortgages and about 15% of renters in negative cash flow.

And the broader economy is slowing. GDP growth is forecast at 1.6% for the year to December 2026 and 1.3% by December 2027, with Unemployment rising to 4.9% by December 2027 and 5.1% by December 2028. Hauser was candid: "We need a period of below-trend growth to bring inflation down, and we're seeing that happening."

The bottom line

The 2026 tally stands at five increases and 125 basis points, taking the cash rate target to 4.85%. The RBA judges financial conditions to be restrictive, yet its forecasts still show inflation above 3% through much of 2027. With the Board now divided 6–3, the next monthly CPI release on 25 November and the 8 December decision will be closely watched. Readers who want to understand how this tightening affects their own finances can consider speaking with a licensed adviser or their lender.