Recent Middle East-related energy price surges have kept euro area headline inflation elevated, with ECB staff projections showing averages of 3.0% in 2026 and 2.5% in 2027—well above the 2% target. This prompted the Governing Council to raise the deposit facility rate by 25 basis points to 2.50% in September 2026, with markets pricing a further hike by year-end amid upside inflation risks and resilient growth. The resulting hawkish stance, reinforced by stable long-term expectations and data-dependent guidance, underpins the 95.5% market-implied probability against an ECB rate cut in 2026. Tail risks include a rapid dissipation of energy pressures or sharper-than-expected growth slowdown that could prompt earlier easing, though current trajectories make such shifts unlikely before year-end.