RBA hikes the Cash Rate Target by 25bps to 4.85%, as expected, with the decision made through 6-3 vote in which 3 voted for a pause, while the RBA sees materially higher inflation and noted inflation risks are still to the upside

Says: Inflation is expected to remain elevated through much of 2027, with the top of the 2–3% target range not reached until late 2027. The Board will continue taking necessary action to return inflation sustainably to target. Inflation outlook has been revised materially higher in the updated staff forecasts. Monetary policy remains well positioned to respond to developments, with the Board focused on price stability and full employment. Domestic capacity pressures are assessed as slightly tighter than previously thought. The Board remains mindful of the prolonged period of elevated inflation. Given the revised inflation outlook and persistent upside risks, the Board judged further tightening in financial conditions was warranted to support inflation returning to target. Cash rate increases since the start of the year have tightened financial conditions. AI-related investment is driving rapid price growth for technology-related goods, while inflation across many goods and services remains high. Inflation is now expected to remain above 3% over the coming year, with an increasing risk of higher inflation expectations becoming entrenched. Capacity pressures appear somewhat tighter than previously estimated, while higher fuel prices are showing signs of being passed through to other goods and services. Output growth is forecast to slow further over the coming year, which should ease capacity pressures and help bring inflation back to target. STATEMENT ON MONETARY POLICY Inflation in Australia remains well above target and a number of upside risks have crystallised since the August Statement. In particular, materially higher global energy prices as a result of the Middle East conflict have added to inflationary pressures.# Outlook for inflation has been revised materially higher and reflects a higher assumed path for energy prices amid the ongoing Middle East conflict and greater domestic capacity pressures. Headline and underlying inflation are expected to remain above 3 per cent until end-2027, some time later than forecast in August, and reach the midpoint of the 2–3 per cent range in mid-2028. Globally, higher energy prices and resilient demand growth have added to inflationary pressures, and most advanced-economy central banks have either raised policy rates or are expected to. Financial conditions appear to be restrictive, which is expected to weigh on domestic capacity pressures. Some of the upside risks identified in August have materialised and are now incorporated in the central forecast, including greater domestic capacity pressures and higher oil prices. But upside risks to inflation from the Middle East conflict and AI-related investment are judged to remain. Table: Output Growth, Unemployment and Inflation Forecasts Indicator Jun 2026 Dec 2026 Jun 2027 Dec 2027 Jun 2028 Dec 2028 GDP growth 2.1 1.6 1.6 1.3 1.3 1.5 Previous (1.9) (1.4) (1.5) (1.6) (1.6) (1.8) Unemployment rate 4.4 4.7 4.8 4.9 5.0 5.1 Previous (4.4) (4.5) (4.6) (4.7) (4.8) (4.8) CPI inflation 3.9 4.5 3.7 2.7 2.5 2.4 Previous (3.9) (3.6) (2.8) (2.6) (2.4) (2.4) Trimmed mean inflation 3.6 3.6 3.5 2.9 2.5 2.4 Previous (3.6) (3.3) (3.0) (2.6) (2.4) (2.4) Year-average forecasts (%) Indicator 2025/26 2026 2026/27 2027 2027/28 2028 GDP growth 2.3 2.1 1.8 1.5 1.3 1.4 Previous (2.2) (1.9) (1.5) (1.5) (1.6) (1.7) Assumptions Indicator Jun 2026 Dec 2026 Jun 2027 Dec 2027 Jun 2028 Dec 2028 Cash rate (%) 4.3 4.7 4.9 4.8 4.8 4.8 Trade-weighted index 66.1 65.2 65.3 65.3 65.3 65.3 Notes: Forecasts finalised on 28 October 2026. June 2026 figures are historical data. Unemployment rate represents the average rate in the quarter. Cash rate assumptions are based on financial market pricing as of 28 October 2026. The trade-weighted index is assumed to remain unchanged from its level on 28 October 2026. Sources: ABS, LSEG, RBA.