Inflation is no longer expected to reach the top of the RBA's 2–3% target range until late 2027, roughly three quarters later than the Bank's previous forecast.

For more than three years, the Reserve Bank has been working to a destination: Inflation back inside its 2–3% target range, with the aim of settling at the 2.5% midpoint. On 3 November 2026, the expected arrival time at that destination moved again, and not in the direction borrowers had hoped.

According to the Monetary Policy Board's decision statement, inflation is now forecast to stay above 3% over the coming year and is not expected to reach the top of the target range until late 2027. That is about three quarters later than previously forecast. Alongside that revision, the Board raised the cash rate target by 25 basis points to 4.85%, effective 4 November, in a six to three vote. Three members preferred to hold at 4.60%.

How the timeline has stretched

Context helps here. Inflation peaked at 7.9% at the end of 2022. Assistant Governor (Economic) Sarah Hunter, in an interview aired on 25 October, pointed to the progress made since then: "We have actually brought inflation down over the last few years." She added: "We've managed to do that and not see a really big increase in the Unemployment rate."

That disinflation has stalled and partly reversed in 2026. Monthly headline CPI rose from 3.5% year-ended in July to 4.0% in August and 4.3% in September. The trimmed mean, the RBA's preferred underlying measure, was 3.7% year-ended in the September quarter.

As recently as August, the RBA's Statement on Monetary Policy (SMP) projected inflation returning to the target midpoint in late 2027, as Governor Michele Bullock reminded the Senate Economics Legislation Committee on 28 October. The November SMP pushes the whole path out. Comparing the trimmed mean forecasts (November first, August in brackets) shows the shift:

  • June 2027: 3.5% (3.0%)
  • December 2027: 2.9% (2.6%)
  • June 2028: 2.5% (2.4%)
  • December 2028: 2.4% (2.4%)

On the November numbers, the trimmed mean is only just inside the band at December 2027 and does not reach the 2.5% midpoint until June 2028. In August, it was forecast to be at the top of the band by June 2027. The SMP itself says "Headline and underlying inflation are expected to remain above 3 per cent until end-2027", while its table shows headline at 2.7% and the trimmed mean at 2.9% for December 2027 — so the clearest summary is that inflation stays above 3% through much of 2027.

All of these are forecasts, conditioned on assumptions about interest rates, the Exchange Rate and energy prices. They are not commitments.

What pushed the date back

The decision statement lists the drivers, which can be paraphrased as:

  • higher fuel and Commodity prices stemming from the conflict in the Middle East
  • capacity pressures in the economy, with Demand running ahead of supply
  • AI-related Investment pushing up prices for technology goods.

The SMP opens bluntly: "Inflation in Australia remains well above target and a number of upside risks have crystallised since the August Statement." It also states that "The economy is currently operating with excess demand and is judged to reach balance next year".

Deputy Governor Andrew Hauser offered further detail at a Citi conference in Sydney on 21 October. Oil was above $100 a barrel, about a third higher than the August assumption, and the RBA had cut its assumption for underlying productivity growth from 1% to 0.7%. Slower productivity growth means the economy can grow less quickly before it runs into capacity limits, which helps explain why inflation is expected to take longer to come down.

Why the delay itself is the problem

A later return to target is not just a matter of a date on a chart. The longer inflation stays high, the greater the chance that households and businesses begin to treat it as normal and set prices and wages accordingly.

The Board was explicit about that risk: "there is an increasing risk that higher inflation expectations will become embedded." Hauser had already observed a rising share of firms seeing 3–3.5% inflation as the "new normal", and said: "We can't allow expectations to shift away from the target."

The decision statement also contained a line that reads as a reflection on the timeline itself: "The Board is conscious of the period in which inflation has been too high." Hunter made a similar point in plainer language: "We don't want to live with high inflation for a long time."

Recent RBA research supports the idea that actions, not just words, shape these beliefs. A Research Discussion Paper published on 22 October by Jonathan Hambur and Qazi Haque found that professional forecasters' perceived responsiveness of policy to inflation rose sharply after the 2022 tightening, and that their beliefs shifted after actual policy moves — communication alone was not enough.

The trade-off built into the new path

Getting back to target later, even with a higher cash rate, comes at a cost to activity. The November forecasts have unemployment rising to 4.9% by December 2027 and 5.1% by December 2028, compared with 4.7% and 4.8% respectively in August. GDP growth is forecast at 1.3% over the year to December 2027, down from 1.6% previously.

Hauser has been candid about that trade-off: "We need a period of below-trend growth to bring inflation down, and we're seeing that happening." He also said: "No lost Job is one to celebrate."

The Board did not rule anything in or out for coming meetings. Its statement concluded: "The Board will continue to do what it considers necessary to bring inflation sustainably back to target."

The bottom line

The RBA's return-to-target timeline has slipped by about three quarters, with inflation now not expected to reach the top of the 2–3% range until late 2027 and the trimmed mean forecast only reaching the 2.5% midpoint by June 2028. The Board's concern is less the delay itself than what a prolonged period of high inflation could do to expectations, which is why it chose to tighten again despite a slowing economy. The forecasts may shift again; the next monthly CPI figures are due on 25 November 2026 and the next decision on 8 December. Readers unsure how this affects their own position can consider speaking with a licensed adviser or their lender.