Key Highlights

  • The RBA's forecasts assume the cash rate rises by 35 basis points by mid-2027.
  • The path reflects market pricing as at 28 October, not a commitment by the Board.
  • On that path, headline Inflation is still expected to peak at 4.5% in the December 2026 quarter.
  • Market pricing can change quickly as new data arrive.

The Reserve Bank's November forecasts rest on a cash rate path that rises by 35 basis points by mid-2027, but that path comes from market pricing, not from the Board, and reading it correctly matters.

Tucked into the Outlook chapter of the RBA's November 2026 Statement on Monetary Policy is a sentence that is easy to misread. The cash rate path underpinning the forecasts, it says, "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028."

At first glance, that might look like the RBA signalling more rate rises. It is not. The path is an assumption, drawn from market pricing as at 28 October 2026, used so the RBA can produce forecasts for growth, inflation and unemployment.

Why forecasts need an assumed cash rate

Any economic forecast has to assume something about interest rates, because rates affect spending, borrowing, the Exchange Rate and, ultimately, inflation. The RBA's approach in the November Statement is to take that assumption from market pricing rather than setting its own path.

This has two practical effects. First, the forecasts show what the RBA expects to happen if the cash rate follows the path markets were pricing at the time.

The Board's own language on future policy is deliberately general. Its statement on 3 November said it "will continue to do what it considers necessary to bring inflation sustainably back to target." Governor Michele Bullock put it similarly: "Returning inflation to target is our priority, and we will do what is necessary to achieve that."

The path, period by period

The Statement presents the assumed cash rate as year averages. As at 28 October, they were:

  • 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 blend periods with different rates and do not show the exact level at any single point. They also predate the 3 November decision, which took the cash rate target from 4.60 per cent to 4.85 per cent, effective 4 November.

The shape is clear enough: the averages rise to a high point around 2026/27 and then ease slightly to settle at 4.8 per cent. That matches the Outlook chapter's description of a path that rises "by mid-2027" before "declining a little".

Markets had also priced the November move itself with a high degree of confidence. The Financial Conditions chapter reported that, before the meeting, OIS pricing implied "market participants assign an 85 per cent probability to a cash rate increase in November".

What the forecasts look like on that path

Conditioned on that market path, the RBA's November forecasts for the economy are as follows (year-ended, with August forecasts in brackets where available):

  • Headline CPI: 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); 2.4 per cent in December 2028 (2.4).
  • Trimmed mean: 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); 2.4 per cent in December 2028 (2.4).
  • Unemployment rate: 4.7 per cent in December 2026 (4.5), rising to 5.1 per cent by December 2028 (4.8).
  • GDP growth: 1.6 per cent in December 2026 (1.4); 1.3 per cent in December 2027 (1.6).

In short, even with a higher assumed cash rate, the RBA expects inflation to stay above target for longer than it did in August, and Unemployment to rise. "Headline and trimmed mean inflation are now expected to remain above 3 per cent until end-2027," the Overview states.

For context, the latest actual figures are 3.9 per cent headline CPI and 3.7 per cent trimmed mean over the year to the September quarter. The separate monthly CPI indicator showed 4.3 per cent for the September month.

What else sits in the assumptions

The cash rate is not the only assumption. Oil is a major one: "The assumed oil price in the December quarter is 35 per cent higher than assumed in August", and oil is "assumed to be 11 per cent higher by end-2028 than assumed in August."

The exchange rate is another. The Statement assumes the trade-weighted index averages 65.2 in 2026 and 65.3 from 2026/27 to 2028, held unchanged from its 28 October level. As at 4.00 pm on 11 November, the index was 63.8, below that assumption.

When actual conditions differ from the assumptions, the forecasts become less directly applicable. That is a normal feature of conditional forecasting rather than a sign the forecasts are wrong.

Common misreadings

Three points are worth keeping in mind:

  • It is not a promise. The path is derived from market pricing. The Board has made no commitment to follow it.
  • It is not the RBA's view of where rates should go. It is the RBA's chosen conditioning assumption for forecasting purposes.
  • It can change quickly. Market pricing moves with new data. A path taken as at 28 October may already look different by the next Statement.

The bottom line

The "35 basis points by mid-2027" figure describes the market-implied cash rate path the RBA used to build its November forecasts, not a plan by the Board. On that assumed path, the RBA still expects headline inflation to peak at 4.5 per cent in the December 2026 quarter, both inflation measures to stay above 3 per cent until end-2027, and unemployment to rise to a bit over 5 per cent by end-2028. The Board's actual decisions, starting with the next one at 2.30 pm on 8 December, will be made meeting by meeting as data arrive.