Recent ECB policy tightening, including the September 25 basis point hike to a 2.50% deposit facility rate, underpins the 95.5% implied probability against an ECB rate cut in 2026. Elevated energy-driven inflation, reaching 3.2% in August amid Middle East conflict, prompted upward revisions to staff projections showing headline inflation averaging 3.0% for 2026 and core at 2.5%, with risks tilted higher. Labor market resilience and stable long-term expectations further support a restrictive stance, as markets price additional hikes into 2027. Tail risks include rapid geopolitical de-escalation sharply lowering energy prices or a pronounced growth contraction forcing earlier easing, though current data-dependent guidance and inflation trajectory limit these scenarios.