The European Central Bank is widely expected to raise its deposit rate by 25 basis points to 2.50% today, with the move already fully priced in by the markets. With the rate decision itself unlikely to provide much of a surprise, the focus will be mainly on President Lagarde’s press conference. The meeting comes against a complicated backdrop for the Governing Council. Eurozone headline inflation accelerated to 3.3% y/y in August, while energy prices have risen sharply amid the ongoing geopolitical tensions and disruptions in the Strait of Hormuz. European gas prices reached the highest levels since 2022 recently and the Iran war doesn't look like it's going to end anytime soon. At the same time, core and services inflation have continued to moderate and economic activity has proved more resilient than previously expected.Today's hike would take the deposit rate to the upper end of the ECB's estimated neutral range. This makes the meeting particularly important for determining whether the ECB views 2.50% as sufficient to deal with the current shock or whether policy needs to move further into restrictive territory.The consensus among investment banks is that September is either the end of the tightening cycle or very close to it. None expects the ECB to commit explicitly to another hike, although most acknowledge that the risks remain skewed toward further tightening if energy prices remain elevated or inflationary pressures broaden.Little change to the statement, with data dependence to remain centralThere's a broad consensus that the ECB is unlikely to make significant changes to its statement (click here for the previous statement). The Governing Council is expected to maintain its meeting-by-meeting and data-dependent approach, particularly given the unusually high degree of uncertainty surrounding energy prices and the geopolitical situation.The assessment of the economy is also unlikely to change meaningfully. Growth has been more resilient than expected, while inflation remains above target and energy prices represent a renewed upside risk. The balance of risks will therefore remain broadly similar, with downside risks to growth and upside risks to inflation.Lagarde's press conference will be more important than the statement. The general expectation is that she will avoid providing explicit guidance on the next meeting and instead emphasize that future decisions will depend on incoming data. This would be consistent with the ECB's recent communication strategy.However, the tone will be important. A more hawkish Lagarde could emphasize the persistence of the energy shock, the risk that inflation remains above target for longer and the possibility that further tightening could be required.On the other hand, highlighting the moderation in core and services inflation, the risk of overtightening and the impact of higher rates on already tight financial conditions would give a more dovish look.Economic projections to show stronger growth, but a more complicated inflation outlookThe updated macroeconomic projections are expected to show upward revisions to growth, reflecting the better than expected performance of the Eurozone economy. The inflation projections are more complicated. Goldman Sachs expects the 2026 headline and core inflation forecasts to be revised down by 0.1% because inflation data have been softer than the ECB previously anticipated. However, it expects the 2027 headline inflation forecast to rise by 0.4% to 2.7%, with core inflation rising by 0.1% to 2.6%. The reason is primarily the energy shock. Higher spot and forward energy prices suggest that inflation could remain above target for longer than previously expected.UniCredit similarly expects a hawkish tilt to the inflation projections, particularly through an upward revision to next year's inflation outlook and a later convergence toward the 2% target.MUFG is somewhat less concerned about the projections. It expects the 2026 headline inflation forecast could actually be revised lower following the recent undershoot in inflation, while warning that the projections may already look stale because the technical cut-off date is likely to have preceded the latest surge in natural gas prices.The ECB's baseline projections may not fully capture the most recent energy-price shock. This is why Lagarde's comments will be more important for the markets.Consensus summary25bp hike to 2.50% today.The hike itself is fully priced and therefore won't move markets.The ECB will retain a data-dependent, meeting-by-meeting approach.Lagarde is unlikely to explicitly pre-commit to another hike.Growth forecasts should generally be revised higher.Energy prices represent a significant upside risk to inflation.Core and services inflation remain considerably less concerning than headline inflation.Further hikes remain possible, but the ECB is unlikely to strongly signal them today.The September hike is likely to mark the end of the current tightening cycle, or at least the end of its first phase.Market pricingMarkets are currently pricing around 48bps of tightening by year-end and 85bps by the end of 2027. This means traders expect the ECB to hike at least three times by December 2027, including today's increase. That is a significant amount of tightening already embedded in the curve. Therefore, the risks for the euro are skewed to the downside, as the ECB will need to "outhawk" market's expectations to trigger a hawkish repricing and give the euro a boost. A 25bps hike followed by a cautious Lagarde would be taken as more dovish and weigh on the euro, as the rate hike bets would get pared back. If Lagarde emphasizes that the ECB is prepared to continue hiking should inflation risks persist, the euro could see some upside as it would signal more "appetite" for further tightening.In summary, with the market already pricing an aggressive path, the bar for the ECB to deliver a hawkish surprise is high.SummaryThe ECB is certain to deliver a 25bps hike today, making the decision itself largely irrelevant for markets. The focus will be on the guidance. The consensus points toward higher growth projections, a more complicated inflation outlook because of the energy shock, and continued data-dependent language from Lagarde. The main disagreement is over what happens next. MUFG and ING lean toward September being the end of the cycle, while Goldman, Wells Fargo and UniCredit see a meaningful risk of further tightening if energy prices remain high or inflation broadens.For markets, however, the main point is that the bar for a hawkish surprise is already high. With around 48bps of tightening priced in by year-end and a total of 85bps by the end of 2027, the ECB needs to outhawk the market rather than simply sound hawkish to generate a meaningful EUR-positive reaction.And even if it succeeds, the euro's rally could be vulnerable to reversal as attention would quickly shift toward the US CPI report and the FOMC decision, where changes in the Fed's expected policy path could once again dominate EUR/USD. This article was written by Giuseppe Dellamotta at investinglive.com.