The Reserve Bank of Australia lifted the Official Cash Rate by 25 bps to 4.85% from 4.60% at its November meeting, a move in line with expectations and the fifth increase of 2026, taking policy to an 18-year high. The decision was reached by a majority, with the central bank citing a revised inflation outlook and ongoing upside risks as grounds for further tightening of financial conditions. It said AI-related spending is driving a sharp rise in tech goods prices, while broader price pressures persist, and inflation is expected to remain above 3% over the next year with a rising risk of entrenched expectations.
The Monetary Policy Statement set out forecasts for GDP growth of 1.6% in Q4 2026 and Q2 2027, easing to 1.3% in Q4 2027, before edging up to 1.5% in Q4 2028; unemployment is seen at 4.7%, 4.8%, 4.9% and 5.1% over the same quarters. CPI is projected at 4.5% in Q4 2026 then 3.7% in Q2 2027, before falling to 2.7% in Q4 2027 and 2.4% in Q4 2028, while trimmed mean CPI is forecast at 3.6%, 3.5%, 2.9% and 2.6%. The cash rate is expected to average above 4.7% in Q4 2026 and 4.9% in Q2 2027, then 4.8% through Q4 2027 and Q4 2028; AUD/USD was down 0.20% to 0.6980 soon after the decision.
