Neither the Bank of England nor Fed moved their rates last week. Both had three members voting for hikes, but their respective press conferences sent markets on different tracks with regard to future rate moves.
- The Federal Reserve voted 9-3 to hold rates, which pushed the first fully priced in hike back to October, but saw the 5-, 10- and 30-year Treasury yields hit their highest levels since 2007. This suggests to us a lack of belief by the market that The Fed will tame inflation any time soon.
- The Bank of England voted 6-3 for a hold, but given which members voted to hold and the resumption of publishing a central forecast, the market would seem to us to be buying more into Governor Bailey’s call for continued patience. The market has reduced its implied peak for rates down by 14bps to 52bps higher than current rates, but we believe there will only be 25bps at most.
- EU inflation saw the headline rate rise from 2.8% in June to 2.9%. The core rate also rose from 2.4% to 2.5% and services inflation, which the ECB looks at particularly closely, also edged up from 3.2% to 3.3%. The July data is unlikely to change policymakers’ views much ahead of the next ECB meeting – not least because the August data will be published before then – but a hike is 87% priced in by the market.
- EU GDP growth was much higher than expected in Q2, at 0.4% quarter on quarter, due to an outsized figure for Ireland, which was up 3.9%, although that measure can be volatile. Excluding Ireland, GDP growth would have been around 0.25%, with growth at 0.2% in Germany, France, and Italy – the three largest economies in the EU.
- Iran-US talks continue to affect the oil price, as headline-watching becomes the need again. President Trump said talks would resume, Iran said they wouldn’t talk to the US, but they have talked to Oman about reopening the Strait of Hormuz. As a result, oil dropped $10 in two days, but then bounced back 20% of that drop.
Source: Bloomberg; pricing as per 4 August 2026
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