RBA set to hike as inflation proves more persistent
At a Glance
The desk anticipates a 25bp rate hike from the Reserve Bank of Australia (RBA) at their upcoming meeting on November 3, driven by persistently high inflation stemming from rising fuel prices and generalized inflationary pressures. Per the full note from ing-think, recent CPI data shows a significant 90bp increase in headline inflation quarter-over-quarter, with annual inflation now standing at 4.3%. This heightened inflation scenario compels the RBA to act sooner rather than opt for a delay until December, leading the desk to forecast a near-term AUD appreciation towards 0.710.
Key Takeaways
- 01RBA expected to hike rates by 25bp on November 3.
- 02Strong inflation print at 4.3% YoY reinforces this position.
- 03AUD is projected to strengthen towards 0.710 in the near term.
Full Analysis
What the desk is arguing
The desk projects that the RBA is likely to deliver a 25bp rate hike in its November 3 meeting, influenced by stronger-than-expected inflation data. The impact of rising fuel costs is compounded by the broader economy, as both goods and services inflation have accelerated, now exceeding 4% annually. This contextual backdrop, coupled with the RBA's commitment to managing inflation, reinforces the desk’s stance on a near-term AUD surge towards 0.710.
Continued inflationary pressures have prompted the RBA to reconsider its timeline for rate hikes, with indications that the path to price stability may necessitate immediate action rather than a gradual approach. As such, the RBA’s strategy has pivoted to focusing sharply on inflation targets, suggesting a hawkish approach moving forward.
Where it sits in our coverage
Current consensus for AUD/USD targets situates at 0.7000 for the December 2026 timeframe, with forecast ranges extending from 0.6600 to 0.7300. Specific firm targets include: - rabobank: Dec-26 target of 0.7200 - nomura: Dec-26 target of 0.7200 - scotiabank: Dec-26 target of 0.7500
The desk's projection of 0.710 aligns closely with the upper bound of the prevailing targets, illustrating a stronger outlook compared to the consensus.
How other firms see it
The bullish view on AUD is echoed by firms like rabobank and nomura, which also project upward moves in AUD/USD. Conversely, firms such as rbc and bofa hold a more cautious stance, suggesting targets closer to 0.6700 for March 2026.
The anticipated RBA action may influence related currency pairs such as AUD/NZD, where shifts in monetary policy could alter competitive dynamics against the New Zealand dollar.
Market Implications
Traders should monitor the 0.710 level closely as an indication of market confidence in the RBA's tightening path. Additionally, the upcoming RBA meeting could serve as a critical catalyst for AUD performance against the backdrop of broader market sentiment.
AUD/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bullish | 0.7200 |
ING | Bullish | 0.7100 |
MUFG | Bullish | 0.7000 |
From the original
Older quick take Quick take Published 10:10 Australia RBA set to hike as inflation proves more persistent Firmer-than-expected inflation data and broader pass-through from higher fuel costs reinforce our view that the RBA will deliver a 25bp rate hike on 3 November rather than wa
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4 itemsEconomic and event calendar in Asia 03 November 2026 - RBA rate hike expected
The desk anticipates a tightening action from the Reserve Bank of Australia (RBA) at its upcoming meeting, despite Deutsche Bank's dissenting view. As highlighted in the note by Eamonn Sheridan, overwhelming consensus suggests that a quarter-point hike to 4.85% is imminent, supported by significant inflationary pressures evidenced by a CPI of 3.7% for the September quarter. The market pricing, at approximately 85% for the hike, underscores the general expectation that the RBA is steadfast in its policy adjustment path. Given this context, the Aussie dollar (AUD) is seen as likely to strengthen, particularly in relation to the upcoming inflation data slated for December, which will provide further clarity on the RBA’s direction going into 2027.
Bank consensus builds for near term RBA hike as economists cite sticky inflation
The prevailing sentiment among economists indicates a high likelihood of an RBA rate hike within the year, driven by persistent inflation concerns. Per the full note [source], six out of seven major banks now foresee at least one rate increase, narrowing the debate to the timing of such a move, particularly focusing on the upcoming September and November meetings. This shift translates to expectations of rising bond yields and upward pressure on the Australian dollar as markets react to inflation data and economic indicators leading up to these meetings. With CBA's adjustment to anticipate a hike in November, now at 4.60%, the market's response will be critical, particularly as data releases on employment and GDP come into play ahead of the RBA decisions, making every data point a substantial market signal.