RBA raises interest rates for the fifth time this year but signals a pause in tightening cycle

Reserve Bank of Australia raised interest rates by 25 basis points in its November monetary policy meeting, in line with expectations.

The central bank lifted its cash rate from 4.60% to 4.85%, the highest level in nearly two decades.

Markets mostly saw today’s action as dovish hike, which signaled that the RBA may be nearing the end of their tightening campaign, as policymakers said that the central bank would continue to do what it considers necessary to bring inflation to target, but dropped a reference to increasing the cash rate further if needed.

The notion is supported by central bank’s updated economic forecasts which showed headline inflation was set to hit 4.5% in the fourth quarter, before easing back to the target band of 2% to 3% in the second half of next year.

RBA’s Governor Michele Bullock said it was unclear what the next move in interest rates would be, adding that the three dissenting members from 6-3 vote, placed greater weight on downside risks as the housing market weakened and unemployment rose.

Bullock added that it was an appropriate time to pause tightening cycle after five hikes of total of 125 basis points of tightening this year that has more than reversed the 75 basis points of policy easing from 2025, and assess how the economy responded to tighter policy, but cautioned that there is still a bit of a skew on the upside to inflation risks, and the central bank needs to be alert.