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# Inflation jump puts a Melbourne Cup Day rate rise on the cards
- URL: https://www.bushletter.com/markets-bet-on-melbourne-cup-day-rate-rise-after-inflation-jumps/
- Published: 2026-10-30T01:30:00.000Z
- Updated: 2026-10-30T01:29:59.000Z
- Description: Traders put the chance of a fifth Reserve Bank rate rise this year at about 90 per cent, with the decision due at 2:30pm on Tuesday.
- Author: Bushletter Newsroom
- Tags: Economy, Finance, Australia

TLDR

Financial markets are pricing about a 90 per cent chance that the Reserve Bank lifts the cash rate from 4.60 per cent on Tuesday, Melbourne Cup Day, after annual inflation rose to 4.3 per cent in September. It would be the fifth rate rise this year.

KEY TAKEAWAYS

01Annual inflation rose to 4.3 per cent in September from 4 per cent in August, driven by housing and fuel.

02The trimmed mean, the RBA's preferred underlying measure, rose to 3.6 per cent, and its quarterly gain of 1 per cent beat the RBA's August forecast of 0.8 per cent.

03Markets price about a 90 per cent chance of a 0.25 percentage point rise at 2:30pm AEDT on Tuesday 3 November.

04The cash rate is 4.60 per cent after four rises this year; a fifth would take it to 4.85 per cent.

05Some economists expect a pause in December, but warn further rises next year would raise the risk of recession.

Borrowers are bracing for an interest rate rise on Melbourne Cup Day, with financial markets pricing about a 90 per cent chance that the Reserve Bank lifts the cash rate when its board hands down its decision at 2:30pm on Tuesday.[\[1\]](https://www.abc.net.au/news/2026-10-30/asx-markets-business-live-news-oct-30/107326558?ref=bushletter.com) A rise of 0.25 percentage points would take the cash rate to 4.85 per cent from 4.60 per cent, its fifth increase this year.[\[2\]](https://www.commbank.com.au/articles/newsroom/2026/10/inflation-cpi-rba-interest-rates-november.html?ref=bushletter.com)[\[4\]](https://www.abc.net.au/news/2026-10-29/asx-markets-business-live-news-29-october-2026/107321622?ref=bushletter.com)

The trigger was Wednesday's inflation figures. Annual inflation rose to 4.3 per cent in September from 4 per cent in August, well above the RBA's target band of 2 to 3 per cent, as housing costs rose 5.2 per cent over the year and fuel prices rose 9.4 per cent in September.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com)

## Underlying inflation is moving the wrong way

The figure the RBA watches most closely, the trimmed mean, rose to 3.6 per cent, even though it strips out volatile items such as fuel. Over the September quarter it rose 1 per cent.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com) "Back in August, the RBA forecast a trimmed mean quarterly gain of 0.8 per cent in the September quarter, so today's 1.0 per cent quarterly gain is confirmation that those inflation risks have indeed materialised," Betashares chief economist David Bassanese said.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com)

KPMG chief economist Brendan Rynne called the figures "the last data point necessary for the RBA to increase the cash rate for a fifth time this year". "It is clear pricing pressures in the Australian economy are growing, not weakening, and the upswing in inflation is catching the market off guard," he said.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com) Deputy governor Andrew Hauser told Senate estimates on Wednesday that inflation was broadly in line with the bank's expectations but too high, a week after warning the outlook looked "materially worse" than forecast.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com) Commonwealth Bank economists now expect a rise to 4.85 per cent.[\[4\]](https://www.abc.net.au/news/2026-10-29/asx-markets-business-live-news-29-october-2026/107321622?ref=bushletter.com)

## What comes after Tuesday

Few economists see Tuesday as the end of it. Mr Bassanese's base case is a rise next week followed by a hold in December, a pre-Christmas reprieve for households. "Should rates need to rise even further next year, the risk of recession would no doubt intensify," he said.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com) Former NAB chief economist Alan Oster told the ABC it may take three more rate rises to calm inflation, a scenario he said would also produce a recession.[\[1\]](https://www.abc.net.au/news/2026-10-30/asx-markets-business-live-news-oct-30/107326558?ref=bushletter.com)

AMP economists Diana Mousina and My Bui said the RBA had little room to wait. "If the RBA doesn't raise rates next week, then their credibility could take a hit and embed higher inflation expectations further," they wrote.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com) The board will also publish updated forecasts for inflation and growth with Tuesday's decision.[\[3\]](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com)

SOURCES & CITATIONS

1. [Markets live, 30 October 2026, ABC News](https://www.abc.net.au/news/2026-10-30/asx-markets-business-live-news-oct-30/107326558?ref=bushletter.com)
2. [September data will keep inflation pressure on RBA, CommBank](https://www.commbank.com.au/articles/newsroom/2026/10/inflation-cpi-rba-interest-rates-november.html?ref=bushletter.com)
3. [Inflation rate rises to 4.3 per cent in September, raising rate hike expectations, ABC News](https://www.abc.net.au/news/2026-10-28/inflation-september-cpi-ahead-of-november-interest-rate-call/107317382?ref=bushletter.com)
4. [Markets live, 29 October 2026, ABC News](https://www.abc.net.au/news/2026-10-29/asx-markets-business-live-news-29-october-2026/107321622?ref=bushletter.com)

FREQUENTLY ASKED QUESTIONS

When is the next RBA rate decision?

The Reserve Bank board meets on Monday and Tuesday and announces its decision at 2:30pm AEDT on Tuesday 3 November, Melbourne Cup Day.

What is the cash rate now?

The cash rate is 4.60 per cent after four rises this year. A 0.25 percentage point rise would take it to 4.85 per cent.

Why are rates expected to rise?

Annual inflation rose to 4.3 per cent in September and underlying inflation also picked up, with the trimmed mean's quarterly rise of 1 per cent above the RBA's forecast of 0.8 per cent.

Will rates keep rising?

Some economists expect a pause in December, but warn that further rises next year are possible and would increase the risk of recession.