The Australian dollar weakened after the Reserve Bank of Australia (RBA) lifted its cash rate to 4.85% on Tuesday, as a split vote and revised guidance accompanied the increase.
Reuters reported AUD/USD at $0.6979, down 0.3%. A later FXStreet update put the pair between $0.6975 and $0.6980, down about 0.15%, and described it as near a two-week low. The currency had been near $0.7025 before the decision, as EconoTimes reported in its earlier coverage.
The 25-basis-point increase lifted the RBA’s cash-rate target from 4.60% to 4.85%. Six members of its Monetary Policy Board supported the move, while three favored leaving the rate unchanged. In September, the board had left open another increase “if needed”; its November statement tied future decisions to new data and its assessment of economic conditions and risks. Reuters reported that markets viewed the change as a less hawkish signal.
The RBA projects headline inflation will peak at 4.5% in the final quarter of 2026 and remain above 3% into late 2027. It sees inflation returning to the middle of its 2%–3% target band around mid-2028. The bank cited higher fuel and commodity costs linked to the Middle East conflict, pressure from limited domestic capacity and rising prices for technology goods amid AI investment. It also said price pressures remained spread across categories, with fuel costs feeding into prices for other goods and services.
The bank expects economic growth to lose further momentum over the coming year. In its outlook, higher borrowing costs and declines in housing prices and turnover are expected to restrain household consumption and residential investment. The unemployment rate is forecast to reach 5.1% by the end of 2028. The RBA said earlier rate increases had already tightened financial conditions as the economy slowed.
FXStreet reported that a softer U.S. dollar amid hopes for Iran diplomacy had not supported the Australian currency. The RBA’s next policy decision is scheduled for Dec. 8.
