Elevated euro area inflation, running near 3% and driven by energy price surges from Middle East conflicts, underpins the 96% market-implied probability against an ECB rate cut in 2026. The deposit facility rate stands at 2.50% following September’s 25 basis point hike, with staff projections showing core inflation at 2.5% for 2026 and upward revisions for later years. Policymakers have adopted a data-dependent, hawkish stance, with markets pricing further hikes into 2027 rather than easing. Recent Reuters polls and ECB communications confirm expectations of a hold in October and possible December tightening, reflecting resilient growth and anchored but elevated inflation expectations. Upcoming October 29 and December meetings, plus fresh CPI data, remain key near-term catalysts that could reinforce this restrictive path absent a sharp disinflation surprise.