The Reserve Bank of Australia published its September meeting minutes overnight, and the board did not soften the message it delivered when it lifted the cash rate to 4.60% three weeks ago. The RBA believed it could be costly to wait for more evidence that inflation pressures were building before raising rates in September. That phrase is the key line traders need to carry into the week. It signals a board willing to move ahead of confirmation, not behind it.
The board unanimously raised the cash rate by a quarter point to 4.60% at its September 28-29 meeting, concluding that several risks identified only a month earlier had either materialised or intensified. Inflation remained too high, with growing evidence that domestic capacity pressures may be greater than previously thought. July inflation data came in stronger than expected, GDP growth ran slightly above forecast, and businesses continued to report widespread cost pressures. Annual inflation reached 4.0% in August, up from 3.5% in July, while trimmed mean inflation held at 3.6%.
The board said it would continue to do what was necessary to achieve its inflation and employment goals, including increasing the cash rate further if required. That language, combined with the unanimous vote, has divided the major banks. ANZ and Westpac both expect a fifth hike in November, which would take the cash rate to 4.85%, while CBA and NAB expect the RBA to hold, though neither rules out a move. Westpac chief economist Luci Ellis said the board’s language and unanimous vote lowered the bar for a follow-up move, making a November hike the base case unless the Middle East conflict is resolved or energy costs fall significantly.
CBA’s posture is more conditional. The bank said it expects rates to stay on hold in the near term, but with risks tilting towards a November hike. CBA has previously highlighted that a large upside surprise to inflation could trigger a follow-up rate hike, and its forecasts as they stand, with the cash rate peaking at 4.60% and core inflation back in the target band in late 2027, imply a real cash rate at or above 1% for the next 12 to 18 months. That is a substantial drag on demand regardless of whether the board hikes again.
The Australian dollar is the instrument where the RBA’s next move gets priced most directly, and the answer so far is cautious. AUD/USD extended its slide during Tuesday’s Asian session, looking to extend the overnight rejection from 0.7000, following the release of the RBA minutes. The pair is trading near 0.6957, having failed to hold above the psychologically significant 0.70 handle. The U.S. dollar retains a bullish undertone near its highest level since April 2025, as energy-driven inflation risks keep December Fed rate hike bets on the table.
That is the structural problem for AUD bulls. Fixed income markets are pricing a hold at the Federal Reserve’s October 28-29 meeting and a rate hike in December, which would lift the federal funds rate target range to 4.00%-4.25% from 3.75%-4.00%. The DXY retreated from an 18-month high to around 102.35 on Tuesday, but the trend over four straight weeks has been dollar strength. When both central banks are tightening simultaneously, the currency with the smaller rate differential does not automatically win. The AUD/USD spread may widen slightly if the RBA hikes to 4.85% while the Fed stops at 4.25%, but the dollar has safe-haven demand, deeper liquidity and geopolitical tailwinds from Middle East tensions that the Aussie dollar does not.
RBA officials noted that Australia’s current cash rate might not be sufficiently restrictive if global neutral interest rates have increased, and that higher rates in other major economies could weaken the Australian dollar if the RBA maintains its existing stance, potentially increasing imported inflation. That feedback loop is the uncomfortable part of the outlook for the RBA: a soft AUD imports more inflation, which justifies more hikes, which slows growth further.
Westpac’s consumer sentiment index fell 4.7% to 80.4 in October, close to the weakest readings in the survey’s history. Households are already under strain from 200 basis points of tightening this cycle. The question is whether Thursday’s labour force figures confirm that or complicate it. The ABS publishes the September 2026 Labour Force report on Thursday, October 15, and the prior unemployment rate was 4.5%. A jump in unemployment would give the RBA pause. A steady or falling reading hands Westpac and ANZ the data they need to feel vindicated in their November hike call.
For traders, the AUD is the cleanest expression of the RBA thesis. A break below 0.6930 reopens the multi-month lows. A hold above 0.70 on Thursday’s data, combined with any softness in U.S. September CPI also due this week, would shift the short-term risk firmly to the upside. Neither central bank is blinking yet. Position accordingly.
