RBA expected to raise interest rate to 4.85%

The Reserve Bank of Australia (RBA) will announce its monetary policy decision on Tuesday and is widely anticipated to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 4.85% from 4.6%. If the RBA delivers as expected, it will be the fifth interest rate hike of 2026, and the OCR will hit an 18-year high.

The decision will be announced at 03:30 GMT, accompanied by the Monetary Policy Statement, and followed by RBA Governor Michele Bullock’s press conference at 04:30 GMT.

Ahead of the announcement, the Australian Dollar (AUD) struggles to retain the 0.7000 mark against the US Dollar (USD).

Focus stays on inflation

Continued inflationary pressures are behind rate hikes in 2026, and Australia is no exception. In fact, the RBA hiked the OCR for the first time in February, before the Middle East war hit global energy prices. As previously noted, the central bank already delivered four hikes, yet, according to the latest available data, Australia’s annual inflation rate stood at 3.9% in Q3, well above the central bank’s 2–3% goal. Additionally, the RBA’s preferred gauge, the core Trimmed Mean Consumer Price Index (CPI), accelerated to 3.7% year-on-year, up from 3.6% in Q2.

RBA Governor Bullock recently appeared before Parliament and noted that “Some of the international and domestic upside risks to inflation have materialized or are materializing.”

“It’s important for the economy that inflation does not diverge from the target for too long,” Bullock added, “since that risks it becoming embedded in inflation expectations, which feeds through to price and wage setting decisions.”

Hot inflation, alongside Bullock’s words, pretty much calls for a rate hike at the Board's meeting. Yet, with a rate hike already priced in, the focus will shift to the press conference led by Governor Bullock, and any hint she gives about what’s next in monetary policy. Bullock is likely to retain her hawkish tone and leave the door open for additional hikes, pushing AUD higher.

How will the Reserve Bank of Australia’s decision impact AUD/USD?

If the RBA delivers the anticipated 25 bps rate hike, the Aussie is likely to find near-term support, although gains will depend on how hawkish the accompanying statement and Governor Bullock’s words are. A larger-than-anticipated hike could trigger a near-term AUD rally, supported by a risk-on mood ahead of the announcement and a weaker Greenback. An on-hold decision is unlikely, but such a move would see the AUD plummeting.

Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD pair is at risk of falling. On the daily chart, the pair found resistance at the start of the week around a flat 100-day Simple Moving Average (SMA) at 0.7030, the immediate resistance level. Last week’s peak at 0.7067 comes next, with the 200-day SMA a handful of pips below the level and also attracting sellers. The same chart shows technical indicators turning south, although holding above their midlines, reflecting the ongoing weakness but falling short of anticipating a steeper decline ahead.”

Bednarik adds: “A slide below 0.6990 will likely trigger additional slides as buyers will be more keen to give up. The slide, then, could extend towards the 0.6640 region. On the contrary, steady gains beyond 0.7070 could end with the pair re-conquering the 0.7100 mark.”