RBA preview November: hawkish hold expected after sticky Q3 inflation

The Reserve Bank of Australia is widely expected to hold its benchmark interest rate at 3.60% following its November 4 meeting, driven by persistent local inflation which RBA Governor Michele Bullock characterized as a "material miss." Analysts anticipate a hawkish outlook, with a high hurdle for any further rate easing this year and potential for a final cut only in the first half of 2026. This expected hawkish stance is likely to further unsettle the ASX 200, which has already declined post-inflation data, while potentially providing support for the Australian dollar.

Analysis

The Reserve Bank of Australia (RBA) is widely expected to hold its benchmark interest rate at 3.60% at its November 4 meeting, a decision primarily driven by unexpectedly strong third-quarter inflation data. RBA Governor Michele Bullock characterized this inflation surge as a "material miss," signaling a pivot from the cumulative 75 basis points of rate cuts implemented earlier in 2025.

Both ANZ and Westpac analysts anticipate a hawkish outlook from the RBA, projecting a high hurdle for any further rate easing this year. Westpac specifically foresees rates remaining unchanged until at least February 2026, contingent on fourth-quarter inflation data, while ANZ expects a final 25 basis point cut only in the first half of 2026.

This anticipated hawkish stance is likely to further unsettle the ASX 200, which has already recorded four consecutive sessions of losses following the Q3 inflation release. Conversely, strong hawkish signals from the RBA, particularly any explicit dismissal of future rate cuts, are expected to bolster the Australian dollar (AUD/USD), which has shown upward momentum despite broader U.S. dollar strength.

Key Decisions for Investors

• Equity investors should anticipate continued volatility and potential downside pressure on Australian equities, particularly the ASX 200, given the RBA's hawkish stance and its implications for economic growth
• FX investors should consider potential upside for the Australian dollar (FXA) if the RBA's communication is definitively hawkish and dismisses near-term rate cut expectations
• Fixed income investors should prepare for Australian bond yields to remain elevated or face upward pressure, reflecting the RBA's commitment to inflation containment and the extended timeline for potential rate easing