Please find attached my latest ECB outlook report. To summarize:

• ECB rates in the near term are priced to perfection. We're in a low (productivity) growth environment and the ECB has hit its target from above. The central bank can't do anything to help growth as underlying inflation is just above two percent. And it will reason that weak growth is a function of horrible producitivity growth and monetary policy can't do anything in this regard;
• Nothing stays the same though. My base case is that, given the slowing Euro Area labor market, I see a US-like scenario play out. Whereby a further cooling of the labor market drags or risks dragging inflation below target. That should invoke a response from the ECB in the form of two 25bps cuts in H1 2026. The slowdown story is confirmed by monetary developments in the Euro Area, still the single-best forward looking indicator for the business cycle;
• Alternatively - and this is consensus (of which I am no part) - Euro Area growth picks up over the course of 2026 on the back of the oft-cited German fiscal stimulus. As per a historically very correct model for ECB rates, the ECB will raise rates a couple of times next year. I emphasize that fiscal 'stimmie' is delivered when the economy is basically at full employment and with very low productivity growth. Fertile grounds for rising inflation indeed.