The ECB is virtually certain to hike rates Thursday. Here is why Wall Street is bracing for what comes next.

The European Central Bank’s decision on Thursday is a foregone conclusion: nearly all observers expect a 25-basis-point rate hike. The real debate, however, centers on the terminal rate—the peak level at which this tightening cycle will finally pause.

Bond markets are showing visible dissent on this endpoint. The core tension lies in the inflation outlook, which is now heavily dependent on external shocks. If the conflict in the Middle East escalates and drives energy prices higher, the ECB could be forced to extend its hiking path well into next year. Conversely, a de-escalation could allow the central bank to hold steady, letting the lagged effects of prior hikes cool the economy.

For investors, the focus shifts from the immediate move to the forward guidance. Watch ECB President Christine Lagarde’s press conference for any signals regarding data-dependence and balance sheet runoff. The market’s reaction will hinge less on the hike itself and more on whether the ECB leaves the door open for further action, or signals that this is the summit of its policy cycle.