The European Central Bank (ECB) has decided to keep interest rates unchanged, citing ongoing inflation risks exacerbated by geopolitical tensions in the Middle East. ECB Executive Board member Klaas Knot Sleijpen highlighted that the eurozone's inflation, driven by a surge in oil prices to a four-year high, reached 3% in April 2026, surpassing the ECB's 2% target. Economic growth remains sluggish, with a mere 0.1% increase in Q1 2026, raising concerns of stagflation. Despite the ECB's current stance, market expectations are firmly set on a significant rate cut by April 2026, with a 100% probability priced in for a 50+ basis points decrease. This reflects the market's anticipation of future ECB actions to address persistent inflationary pressures. Observers are closely monitoring developments in the Middle East and ECB communications for any shifts in monetary policy direction.