With major banks now aligned on a November hike, the decision itself is close to fully priced. The market focus shifts to the RBA’s guidance and whether it leaves the door open to February, which is where the Australian dollar and front-end yields have room to move. A hawkish statement that keeps February live would support the currency, while any signal of a pause would likely see it give back ground. Energy is the main external driver: an escalation in the Middle East that lifts oil would strengthen the case for further tightening, while a US-Iran deal after the midterms would ease it.
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The banks have stopped asking whether the RBA hikes next week and started asking when it stops, and the answer may depend as much on the Middle East as on Australian inflation.
Summary:
Major Australian banks now expect the Reserve Bank of Australia to raise interest rates again at its November 3 meeting, after inflation data all but locked in a fifth hike of 2026, with the debate already shifting to whether the tightening cycle extends into next year.
Commonwealth Bank of Australia and ANZ both moved on Wednesday to forecast a November increase, which would lift the cash rate to 4.85%. Westpac reaffirmed its own call for a hike. The RBA’s September move took the cash rate to a 15-year high, and a further increase would push it to levels last seen in 2008.
CBA described the expected move as an insurance hike, aimed at guarding against inflation risks from the Middle East conflict, the AI-driven global investment boom and tight domestic capacity. It said the RBA had turned decisively hawkish since a more dovish tone after its September decision. ANZ said the data cemented the case for a hike, singling out services, where market services inflation posted its strongest annual growth since 2024. The RBA watches that measure closely because it reflects domestic pressure and is less exposed to global swings such as oil prices.
Westpac said inflation is above both the RBA’s target and what its August forecasts implied, with some of the upside risks identified at the time, particularly energy, partly materialising. It expects most members of the Monetary Policy Board to back a rise, though some may dissent. The bank noted that the RBA has played down a recent rise in unemployment, with Governor Michele Bullock telling a Senate hearing that underlying inflation suggests the labour market is tighter than previously judged. Westpac questioned that reasoning, arguing it gives too little weight to the lags between jobs and prices and to non-labour cost shocks.
Beyond November, views diverge. Westpac does not expect further hikes in its base case but says the risk of another move, most likely in February, has risen. CBA sees the RBA holding in December and February, with cuts possible in late 2027, at the cost of weaker home prices and higher unemployment. One economist called a December hike a high-risk scenario, though not the base case, and said the RBA is more likely to pause after next week to assess the impact.
Energy remains a key swing factor. Westpac said the Middle East conflict could escalate and lift energy prices further, or ease if the US and Iran reach a deal after the midterm elections. It also pointed to the risk of a sudden global slowdown, which New Zealand’s central bank flagged on Wednesday, noting that it does not appear to be on the RBA’s radar.
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Its been a big 2026 for the Reserve Bank of Australia, and its not over yet.
This article was written by Eamonn Sheridan at investinglive.com.
Source: Investing Live - Central Bank
