Key Highlights

  • The RBA's forecasts assume the cash rate rises about 35 basis points by mid-2027.
  • That path is taken from market pricing as at 28 October 2026.
  • The Board has not committed to any path, and its decisions will rest on the data.
  • The cash rate then stabilises at about 4.8 per cent in 2028 under the assumed path.

Every set of RBA forecasts rests on an assumption about where the cash rate is heading. In the November 2026 Statement on Monetary Policy (SMP), that assumption has the cash rate rising about 35 basis points by mid-2027, then stabilising at 4.8 per cent in 2028.

It is easy to read a number like that as a signal of what the RBA intends to do. It is not. The SMP says the path is based on market pricing as at 28 October 2026. It reflects what financial markets were implying about future rates in the days before the Board met, not a plan the Board has endorsed.

Why forecasts need a rate assumption

Forecasting inflation, growth and Unemployment requires a view on interest rates, because interest rates affect spending, borrowing, housing and the exchange rate. A Central Bank has a few ways to handle this. It could assume rates stay where they are, publish its own intended path, or borrow the path implied by market prices.

The RBA's November forecasts use the third approach, with market pricing taken as at 28 October 2026. It also assumes the trade-weighted index (TWI) of the Australian dollar stays flat at about 65.3.

One consequence of this approach is that the path is not an RBA-announced plan. It also means the forecasts show what the RBA expects to happen to the economy if rates follow the path that markets anticipate.

What the path looks like

The SMP presents the cash rate assumption as year-average figures:

  • 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

Because these are averages over a year, they smooth out the timing of individual moves. The SMP's description adds the shape: market pricing implies the cash rate rises about 35 basis points by mid-2027, then stabilises at 4.8 per cent in 2028.

The comparison with August is notable. The SMP says the November path is up to 50 basis points above the path assumed in August. markets had moved substantially between the two forecast rounds towards expecting higher rates.

The RBA's own judgement is that this path is restrictive. That is, the Bank considers a cash rate following this trajectory would be high enough to restrain the economy and help bring Inflation down.

It is also worth noting the timing. Pricing as at 28 October predates the 3 November decision to raise the cash rate target to 4.85 per cent. Markets react to new information, so the path implied by market prices may have shifted since.

What the forecasts show on that path

With the market path built in, the RBA forecasts a slow return of inflation to target and a weaker economy. The key figures, as RBA forecasts with the August forecasts in brackets, are:

  • Headline CPI inflation: 4.5 per cent in December 2026 (3.6), 3.7 per cent in June 2027 (2.8), 2.7 per cent in December 2027 (2.6) and 2.5 per cent in June 2028 (2.4).
  • Trimmed mean (underlying) inflation: 3.6 per cent in December 2026 (3.3), 3.5 per cent in June 2027 (3.0), 2.9 per cent in December 2027 (2.6) and 2.5 per cent in June 2028 (2.4).
  • GDP growth: 1.6 per cent in December 2026 (1.4), slowing to 1.3 per cent in December 2027 (1.6).
  • Unemployment rate: 4.7 per cent in December 2026 (4.5), rising to 5.1 per cent by December 2028 (4.8).

Headline inflation is forecast to peak at 4.5 per cent in the December quarter of 2026 and reach the midpoint of the 2–3 per cent target range in mid-2028.

The higher rate path is part of why growth is weaker later in the forecast period. The SMP says weaker housing and the higher cash rate path are a key reason for lower GDP growth from mid-2027.

For comparison with the forecasts, the latest actual inflation data show headline CPI at 4.3 per cent over the year to September 2026 on the monthly measure and 3.9 per cent over the year to the September quarter. Trimmed mean inflation was 3.7 per cent over the year to the September quarter, with a quarterly rise of 1.0 per cent.

Assumption, not promise

The Board's statement offers no forward commitment that would confirm or contradict the market path. It says "the Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions." It also says "Monetary policy is well placed to respond to developments".

The November vote itself showed differing views within the Board. Six members voted for the rise to 4.85 per cent, while three preferred to hold at 4.60 per cent. The statement gives no reasons for the minority view.

The SMP also sets out scenarios in which the outlook could differ. In one, Crude Oil stays around US$100 a barrel with elevated refined product prices, and underlying inflation is around 2¾ per cent by end-2028 rather than about 2½ per cent. In another, households and businesses respond more strongly to oil prices, interest rates and falling house prices, leaving GDP about 1.0 per cent lower by end-2028 and unemployment 0.3 percentage points higher, with inflation only modestly lower. Either could change what markets expect from the Board, and what the Board ultimately does.

For borrowers, the market path is not a forecast of their own Loan rate. Lenders set their own rates, and how they respond to future cash rate decisions is up to them.

The bottom line

The RBA's November forecasts are built on market pricing as at 28 October 2026, which implied the cash rate rising about 35 basis points by mid-2027 before stabilising at 4.8 per cent in 2028. That path is up to 50 basis points above the one assumed in August, and the Bank judges it restrictive. On that path, the RBA forecasts headline and trimmed mean inflation reaching 2.5 per cent by mid-2028, with unemployment rising to 5.1 per cent by end-2028. It is a conditioning assumption, not an RBA promise, and the next test of it comes at the 8 December decision.