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The RBA hiked the cash rate for the fifth time this year, to 4.85%, its highest level in 18 years.

Like any good Cup Day runner, it was a tight race, with the odds slightly tipped towards a hike. 

The big four banks were split, ANZ and Westpac were tipping a hike, CBA was leaning towards a hold but acknowledged a hike was becoming more likely, and NAB stuck firmly in the hold camp.

Why were economists expecting a hike? 

Inflation had us feeling optimistic in July, dropping to 3.5%. Then it did a full 180… climbing to 4.0% in August and landing at 4.3% in September, the highest we’ve seen all year.

Quick reminder: Inflation measures the increase in the prices of goods and services using the Consumer Price Index…this includes things like fuel, housing and groceries.

Even underlying inflation, the RBA’s favourite measure of inflation, came in at 3.6% annually and 1.0% for the quarter, well above what the Bank was banking on. 

I’m going to need more details than that…

It’s not just rising inflation that the RBA’s worried about… they've got a LOT on their plate right now…

1. Fuel keeps getting more expensive.  Brent crude pushed to around US$115 a barrel, a ~3% jump and its highest since April, as Middle East tensions flared up again. These price pressures continue to trickle down to our economy, with businesses passing costs onto consumers.
   
   
2. Deputy Governor Hauser also flagged that capacity pressures in the economy are “pretty elevated”. Translation: businesses can’t keep up with demand, so instead of racing to meet it, they’re just putting prices up. This means some of this inflation is homegrown.
   
   
3. Lastly, unemployment climbed to 4.7% in September, a five-year high. While inflation was making the case for a hike, a softer jobs market gave the RBA a reason to pause, as another rate hike could put even more pressure on businesses and jobs.

In the end, the RBA backed a rate hike, despite the mixed signals.

So what happens when the cash rate goes up?

If you've got a variable-rate home loan, expect your repayments to climb again. Exactly how much depends on the size of your loan.

Savers, this one's actually in your favour. Some savings accounts pass on rate rises, so your interest earnings could tick up too, though it depends on the terms of your specific account.

Either way, don’t bet on breathing room soon. CBA reckons rates won’t budge until mid-2027, with just two cuts pencilled in for later that year, and NAB isn’t even forecasting a cut at all. This isn’t a dash out of the barriers, it’s a longer race.

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