The European Central Bank (ECB) is set to raise its deposit rate by 25 basis points to 2.25% on Thursday, responding to inflationary pressures stemming from increased oil prices due to the ongoing conflict in the Middle East. This move, which is fully anticipated by the market, aims to prevent inflation expectations from becoming unanchored rather than reacting to confirmed economic data. Analysts from Morgan Stanley highlight that the fiscal support available is significantly weaker than during the 2022 energy crisis, which limits the ECB's reliance on government spending to mitigate inflation shocks. As a result, the ECB may need to take more decisive monetary actions. The policy statement is expected to maintain a data-dependent approach, keeping options open amid prevailing uncertainties. Attention will also be directed towards the updated staff forecasts on inflation and GDP, which will provide insights into the ECB's revised growth outlook. Looking ahead, analysts predict another 25 basis-point hike in the third quarter, with a potential policy reversal anticipated in 2027.