European Rates – The Morning Call: FOMC: just the policy decision?

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European Rates – The Morning Call: FOMC: just the policy decision?

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29 Jul 2026 02:00:00 ET │ 15 pages

European Rates – The Morning Call

FOMC: just the policy decision?

CITI'S TAKE

Andrea Appeddu AC

#1 The ECB held steady last week citing lack of second-round effects – will +39-02-8906-4316

softening inflation and moderating payroll growth be enough for the Fed to andrea.appeddu@citi.com

keep rates unchanged later today? The lack of forward guidance from both

Fed and ECB makes us comfortable sticking with our long € vol Damilola Lanre-Ojo

recommendation despite its recent performance. #2 We recommend +442079863918

10s30s OLO flattener vs DSL steepener. #3 EGB gross supply in August is damilola.lanreojo@citi.com

projected to decline to €82bn, amid the seasonal summer slowdown, with

NCR remaining elevated at +€45bn, up from +€36bn in July. #4 Today's Puja V Sawant AC

auction: €6bn of 10yr Bund – see RV within. +91-22-4277-5155

puja.sawant@citi.com

Still all about oil? — With lack of forward guidance from Chair Warsh, markets have AC Jamie Searlebeen left guessing the impact of higher oil prices over the last three weeks on the

Fed’s reaction function, with a 25bp hike priced at roughly 30% for today’s FOMC +44-20-7986-9493

meeting. Despite the previous meeting’s hawkish shift, however, our economists jamie.searle@citi.com

don’t expect the committee to raise rates this time, mostly because of the soft June

core CPI reading as well as a moderation in payroll growth, while they expect multiple

dissents. In their words – “It would be hard to explain declining to hike in June but

then hiking in July after both inflation and jobs data were softer”. Zooming out of the

upcoming meeting, the near-term balance of risk around front-end rates in the US