Key Highlights

  • The RBA's market-based path has the cash rate stabilising at about 4.8% in 2028.
  • The path is a conditioning assumption, not a decision of the Board.
  • The next cash rate decision is due at 2.30 pm on 8 December 2026.
  • The minutes of the November meeting are scheduled for 17 November.

The Reserve Bank's November forecasts rest on a cash rate path that rises a little further, then levels out at 4.8 per cent in 2028 – but that path comes from market pricing, not from a Board promise.

Most attention after the Reserve Bank of Australia's November decision went to the immediate move: on 3 November 2026 the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85 per cent, effective 4 November. Less discussed is a number buried further back in the Statement on Monetary Policy (SMP) – the cash rate assumption that runs all the way to the end of 2028. That assumption flattens out at 4.8 per cent, and understanding where it comes from helps explain how the RBA builds its view of the economy.

Where the 4.8 per cent comes from

Every SMP forecast needs a starting assumption about interest rates, because the path of borrowing costs shapes spending, hiring and prices. The RBA does not use its own preferred rate path for this purpose. Instead, the November forecasts use a cash rate assumption drawn from market pricing as at 28 October 2026, the day the forecasts were finalised.

Expressed as year averages, that assumption reads:

  • 2025/26: 4.3 per cent
  • 2026: 4.7 per cent
  • 2026/27: 4.9 per cent
  • 2027: 4.8 per cent
  • 2027/28: 4.8 per cent
  • 2028: 4.8 per cent

The Outlook chapter describes the shape in words. The cash rate path "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028."

Two features stand out. First, the peak sits in the 2026/27 financial year, at an average of 4.9 per cent. Second, the line does not fall back sharply afterwards. It eases only slightly and then holds steady for an extended period. In other words, as at late October, markets were not pricing a rapid unwinding of higher rates.

Because these are year averages, they describe a broad trajectory, not a schedule of meeting-by-meeting decisions.

An assumption, not a commitment

It is easy to mistake the cash rate line for an RBA forecast of its own behaviour. It is not. The Board's language after the November meeting was about doing what is needed rather than following a pre-set path. Its statement said: "The Board will continue to do what it considers necessary to bring Inflation sustainably back to target."

Governor Michele Bullock made a similar point at her media conference: "Returning inflation to target is our priority, and we will do what is necessary to achieve that."

The market-based path therefore works as a conditioning assumption. The RBA asks, in effect, what the economy would look like if rates followed the path markets expected. If incoming data push the outlook in a different direction, the Board is free to act differently, and market pricing itself will shift.

What the plateau is paired with

The value of the cash rate assumption lies in what the RBA forecasts alongside it. Under a path that stabilises at 4.8 per cent, the November SMP projects:

  • Headline CPI falling from a forecast peak of 4.5 per cent in the December 2026 quarter to 2.7 per cent by December 2027, 2.5 per cent by June 2028 and 2.4 per cent by December 2028.
  • Trimmed mean inflation, the underlying measure, easing from 3.6 per cent in December 2026 to 2.9 per cent by December 2027 and 2.4 per cent by December 2028.
  • Unemployment rising steadily, from a quarterly average of 4.7 per cent in December 2026 to 4.9 per cent in December 2027 and 5.1 per cent in December 2028.
  • GDP growth of 1.3 per cent in the year to December 2027 and June 2028, picking up to 1.5 per cent by December 2028.

The overview summarises the inflation side plainly: "Headline and trimmed mean inflation are now expected to remain above 3 per cent until end-2027". On jobs, it says: "The Unemployment rate is forecast to rise to a bit over 5 per cent by end-2028."

Read together, the picture is of a rate setting that stays restrictive for long enough to bring inflation down gradually, with a slower economy and a softer labour market as the cost. The plateau is not a sign the RBA expects conditions to normalise quickly; it is the backdrop against which a slow return of inflation is projected.

It is worth keeping the measures distinct. The latest actual readings are headline CPI of 3.9 per cent over the year to the September quarter, trimmed mean of 3.7 per cent over the same period, and a monthly CPI indicator showing 4.3 per cent for the September month.

How the path compares with August

The August SMP provides a useful contrast, because the forecasts it carried were based on a different set of assumptions. Since then, the RBA has revised its inflation outlook up and its growth outlook down in later years. Headline inflation for December 2026 is now forecast at 4.5 per cent, against 3.6 per cent in August. Trimmed mean for June 2027 is 3.5 per cent, against 3.0 per cent. GDP growth for December 2027 is 1.3 per cent, down from 1.6 per cent.

Energy is a large part of the story. The Outlook notes that "The assumed oil price in the December quarter is 35 per cent higher than assumed in August". Bullock was careful to say that "we are not tightening monetary policy because of the direct impact of oil prices on inflation."

The bottom line

The 4.8 per cent plateau in 2028 is best understood as the market's late-October expectation, adopted by the RBA as a working assumption so it could forecast the rest of the economy. It implies borrowing costs that stay elevated rather than falling back quickly, and it sits alongside forecasts of inflation returning towards the low-2s only by 2028 and unemployment edging above 5 per cent.

None of it binds the Board. The next cash rate decision is due at 2.30 pm on 8 December 2026, and the minutes of the November meeting are scheduled for 17 November. Each new data release, including the October monthly CPI on 25 November, can shift market pricing – and with it, the assumption the next set of forecasts will rest on.