The ECB’s hawkish stance, with the deposit facility rate at 2.50% following 25-basis-point hikes in June and September 2026, underpins the 95.5% market-implied probability against any rate cut this year. Staff projections show headline inflation averaging 3.0% in 2026—well above the 2% target—driven by energy price surges from the Middle East conflict, with core inflation also revised higher. Markets price additional tightening into year-end or early 2027, consistent with data-dependent guidance and resilient growth forecasts around 0.9%. The next policy meetings and incoming inflation and labor data remain key catalysts. Tail risks include sharper-than-expected growth contraction or rapid energy price normalization that could prompt earlier easing.