ASX on Hold as Investors Await RBA Interest Rate Move

By the Editorial Team · Monday, November 2, 2026

The Reserve Bank of Australia is expected to raise interest rates for the fifth consecutive time on Tuesday, likely pushing the cash rate to 4.85 percent, the highest in 18 years, in response to persistent inflation exceeding target levels. This move, widely anticipated by economists and supported by major banks, may mark the peak of the current tightening cycle as rising borrowing costs begin to slow economic growth and inflation pressures.

The Australian sharemarket is poised for a cautious start on Monday as investors await the Reserve Bank of Australia’s (RBA) imminent announcement on interest rates, expected on Melbourne Cup Day. Market participants are bracing for the central bank’s fifth consecutive rate increase, with an 88 percent probability that the cash rate will rise to 4.85 percent, the highest level in 18 years. There is also growing speculation of a possible sixth hike next year amid ongoing inflation concerns.

Futures point to a modest decline in the S&P/ASX 200 Index, opening around four points lower after a strong performance last week that marked the biggest weekly gain since August. Despite a year-to-date increase of more than 2 percent, the Australian market remains behind Wall Street, where technology-driven gains, particularly in artificial intelligence (AI), have propelled stocks upward despite recent setbacks.

In the United States, all three major indices fell on Friday amid investor caution over the heavy cash outflows into AI ventures, raising doubts about their near-term profitability. The Dow Jones Industrial Average dropped 1.1 percent to 51,770.31, the S&P 500 declined 1.8 percent to 7,580.07, and the Nasdaq Composite fell 2.9 percent to 25,437.00. Adding to the negative sentiment were reports of a cyberattack on Binance, the world’s largest cryptocurrency exchange, leading to a 2.5 percent fall in Bitcoin, which closed at $76,877.30, while Ethereum decreased 1 percent to $2,236.76.

Energy markets also reflected heightened geopolitical risks, with oil prices reaching six-month highs amid concerns about escalating conflict in Iran following the upcoming US midterm elections on Tuesday. Brent crude settled at $113 per barrel and US crude at $104 per barrel. Rodrigo Catril, a senior foreign exchange strategist at National Australia Bank, noted that any post-election military actions could prompt Tehran to target Middle Eastern energy infrastructure, extending supply disruptions and pushing oil prices higher for an extended period.

Domestically, the RBA faces mounting pressure to address persistent inflation. Recent data revealed that headline inflation accelerated to 3.9 percent year-on-year in the third quarter, while the RBA’s preferred core inflation measure climbed to 3.7 percent. Both figures exceed the bank’s 2.5 percent target midpoint, prompting most economists to revise their forecasts in favor of a rate rise despite signs of a weakening labor market.

Of the 32 economists surveyed by Reuters, 31 predict a 25 basis point increase at Tuesday’s policy meeting. Bank of America economist Nick Stenner cited the central bank’s tougher rhetoric and revised assessments of the job market’s slack as key factors behind the shift. Nonetheless, he expects this tightening phase to peak soon, as past hikes begin to dampen household spending and economic growth, with disinflationary pressures emerging from higher borrowing costs, a cooling housing market, and easing labor constraints.

Australia’s major banks, including ANZ, Commonwealth Bank, National Australia Bank, and Westpac, generally support the view that the upcoming rate rise will be the final move in the current cycle. Markets will closely analyze the RBA’s post-decision statement and Governor Philip Lowe’s subsequent media briefing for guidance on policy direction. Additionally, RBA Deputy Governor Andrew Hauser is scheduled to give a speech on Thursday addressing issues related to trust, expectations, and monetary policy, which may offer further insight.

Following Australia’s decision, global focus will shift to the US midterm elections and the non-farm payrolls report due Friday. While Democrats are forecasted to secure control of at least one congressional house, creating potential volatility, the implications for the AI sector, a major driver of recent market gains, are particularly notable. Democratic lawmakers are expected to consider stricter regulations on AI technologies, which may introduce uncertainty for investors.

Emanuel Datt, chief investment officer at Datt Capital, emphasized the intrinsic risks associated with AI investments, pointing to their capital-intensive nature and rapid technological evolution. These factors contribute to increased market volatility and necessitate a higher risk premium compared to more traditional asset classes. Investors will also monitor earnings reports this week from tech giants Palantir and Apple for further indication of the sector’s health amid the shifting landscape.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.