Macro
RBA and Bank of England Both Expected to Raise Rates This Week as Fuel Costs Lift Inflation
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Australia's central bank decides on Tuesday and the Bank of England on Thursday, with markets pricing a quarter-point increase from each.
By Emmanuel Cruz ·
Two major central banks are expected to raise interest rates in the coming days as higher fuel prices tied to the conflict in the Middle East push inflation further above their targets. The Reserve Bank of Australia announces its decision on Tuesday, November 3, and the Bank of England follows on Thursday, November 5 [1][2].
In Australia, the case for a move strengthened after annual consumer price inflation rose to 4.3% in September from 4.0% in August, according to Australian Bureau of Statistics figures reported by ABC News [1]. Fuel prices rose 9.4% in the month, and the quarterly trimmed mean, the RBA's preferred gauge of underlying inflation, rose 1.0% in the September quarter, above the 0.8% the central bank had forecast [1]. The RBA targets inflation of 2% to 3% [1].
The RBA's cash rate stands at 4.60% after a quarter-point increase in September, according to an analysis by Monash University economist Isaac Gross [3]. After the inflation data, market pricing for a 0.25 percentage point increase at this week's meeting rose to about 85%, according to Bloomberg data cited by ABC News [1]. A hike would be the bank's fifth of the year [1]. KPMG chief economist Brendan Rynne called the September figures "the last data point necessary" for such a move [1]. Betashares chief economist David Bassanese said his base case was a hike this week followed by a pause in December, while warning that further increases next year would raise the risk of recession [1].
In the United Kingdom, the Bank of England is widely expected to lift Bank Rate from 3.75% to 4%, which would be its first increase since August 2023 [2]. The Office for National Statistics reported that consumer price inflation rose to 3.5% in the 12 months to September from 3.1% in August, while the CPIH measure, which includes owner occupiers' housing costs, rose to 3.6% [4]. That leaves inflation well above the Bank's 2% target, with petrol and diesel prices a major driver [2].
Other data have given policymakers room to act. UK gross domestic product unexpectedly grew 0.1% in August and unemployment fell to 4.7% in the three months to August, according to figures cited by Yahoo Finance UK [2]. Household energy bills are another pressure point: the regulator Ofgem's price cap rose 3.6% for a typical household on October 1 and is forecast to rise a further 22% in January [2]. Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said a rise to 4% "looks all but certain" [2].
For markets, the two decisions are a test of how far central banks outside the United States are prepared to go in leaning against an energy price shock. Higher rates in Australia and the UK would typically support the Australian dollar and the pound against currencies of central banks that are holding steady, and would weigh on rate-sensitive sectors such as housing and property. The guidance attached to each decision may matter as much as the move itself, since investors are trying to judge whether these are one-off precautionary steps or the start of a longer tightening cycle.
Key items to watch include the RBA's post-meeting statement and any change to its inflation forecasts, the Bank of England's vote split and its updated quarterly projections, and oil prices, which have been the main source of the renewed inflation pressure in both economies.
Sources:
[1] ABC News, "Inflation rate rises to 4.3 per cent in September, raising rate hike expectations", October 28, 2026. https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382
[2] Yahoo Finance UK, "Bank of England expected to raise interest rates for first time since 2023", November 1, 2026. https://uk.finance.yahoo.com/news/bank-england-expected-raise-interest-090012960.html
[3] Monash Lens, "Inflation jumps to 4.3%, adding to pressure for RBA rate rise next week", October 29, 2026. https://lens.monash.edu/inflation-jumps-to-4-3-adding-to-pressure-for-rba-rate-rise-next-week/
[4] Office for National Statistics, "Inflation and price indices", October 21, 2026. https://www.ons.gov.uk/economy/inflationandpriceindices
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.