RBA Hike Odds Top 60% for Nov. 3 After Inflation Warning

Markets price over a 60% chance the RBA lifts interest rates to 4.85% on Nov. 3, up from under 20% a week ago, after a deputy governor's inflation warning.

Lead

Money markets now assign better than a 60% probability that the Reserve Bank of Australia raises its cash rate by 25 basis points to 4.85% at its Nov. 3 meeting. A week ago the odds stood below 20%. The repricing followed an Oct. 21 speech by Deputy Governor Andrew Hauser, who said the inflation outlook is "materially worse" than the central bank projected in August. A November move would be the fifth increase of the year, after the September hike took the cash rate to 4.60%, its highest level since 2011.

What Did the RBA Deputy Governor Say?

Hauser told a Citi investment conference that the quarterly trimmed mean, the central bank's preferred gauge of underlying inflation, appears set to come in above forecast. He also said some households are no longer sure inflation will return to the 2-3% target band at all, a shift in expectations that central banks treat as a trigger for action.

Headline inflation runs near 4%. Oil prices sit about one-third above the level the RBA assumed in August. Hauser also pointed to higher technology and AI-related prices feeding into the consumer price index, and to a data center construction boom adding to demand pressure.

Why Did Rate Hike Odds Jump So Quickly?

Odds jumped because the remarks signaled that the board is prepared to move before the next full forecast round. Pricing for a November hike rose to roughly 42% immediately after the speech and passed 50% within days. It now exceeds 60%.

Before the speech, a hold in November was the central expectation. Several major bank economists have since moved their forecasts to a Nov. 3 increase, which falls on Melbourne Cup day. Some still flag December as a fallback if the board waits.

How Are Markets Reacting?

The reaction has been mixed across asset classes. The Australian dollar moved back above US$0.70, as the prospect of a higher cash rate widened yield differentials in its favor. The Aussie traded near 69.93 US cents after the September decision.

Equities were more cautious. The ASX 200 opened 0.8% lower on Monday at 8,729, with the four large banks each down 1% to 2%, before recovering to close higher. Higher interest rates raise funding and mortgage-stress concerns for lenders even as they support net interest margins.

What Does the September-Quarter CPI Mean for the Decision?

The September-quarter CPI release on Oct. 28 is the key test, because it will show whether Hauser's warning is borne out. Forecasts point to quarterly trimmed mean growth of about 1.0%, which would hold the annual rate at 3.6%, and headline CPI growth of about 1.3% for the quarter, with fuel and services adding pressure.

A trimmed mean reading at or above those forecasts would likely lock in a hike. A softer print would test the market's pricing, which now leaves little room for a hold.

Strategic Context

The RBA has raised the cash rate four times in 2026, and the September move to 4.60% was the fourth. Officials have said the job on inflation is not finished. The central bank is balancing cooling growth against inflation that has proved stickier than projected, with energy costs and technology-related price pass-through adding to the pressure.

Households with variable-rate mortgages feel each increase quickly. A move to 4.85% would add to repayments already lifted by four earlier hikes this year.

Outlook

The Nov. 3 decision now hinges on the Oct. 28 inflation data. With odds above 60%, a 25 basis point increase to 4.85% is the market's base case, and a December move remains possible if the board holds. The path of oil prices and the pace of technology-driven price pressure will shape how much further the RBA must go.