Persistent euro area inflation, projected by ECB staff at 3.0% for 2026 amid energy price surges from Middle East conflicts, has driven two 2026 rate hikes and market expectations for another 25 basis point increase to 2.75% by December. With the deposit facility at 2.50% and no signs of rapid disinflation or sharp growth deterioration, traders assign a 96% implied probability against any rate cut this year, reflecting anchored but elevated price pressures and resilient economic data. Tail risks include faster-than-expected energy price normalization or weaker fiscal support that could shift the December decision and open a narrow path to earlier easing.