LloydsBankMarketInsightsRates29July2026 1

Macro Market Insights 29 July 2026

US Rates : The last mile • Markets have been warming to a hike

• Though inflation expectations have been repricing downwards… • …And intervention poses an asymmetric risk to growth

Warming to a hike ? Markets have interpreted the Fed's renewed commitment to price Karim Henide stability as a signal that policymakers increasingly view inflation risks as Rates Strategist persistent , repricing the near -term path for rates (see chart) . Email

Though i nflation is repricing downwards … S hort -term inflation swaps point to lower inflation expectations, having looked -through the recent energy shock (see chart) .

Indeed, the oil shock itself was notably lower than one would have expected, given a weaker economic demand profile vs. the start of the year (see chart) .

…and Inflation risks are narrowing in the basket A hawkish policy response requires evidence that inflation pressures are becoming broader and more entrenched across the economy. Cleveland Fed trimmed -mean CPI continues to trend lower, core contributions have remained broadly stable, and inflation breadth has been narrowing from Q1 highs . Inflation does remain above target, but it is becoming less diffuse across the basket (see chart).

The cost of blinking Inflation is still expected to ease over coming quarters, even if the last mile of disinflation is to be uneven. Against that backdrop, the benefits of an additional hike appear limited. As we argued in our 9 July note, tighter policy at this stage may have only a modest effect on near -term inflation, while carrying a meaningf ul risk of unnecessarily weighing on growth.