Greek turmoil adds to ECB caution

Any earlier suspicions that ECB interest rate hikes might have been on the horizon have surely been blown away by the Greek crisis. For now, the recovery in the broader euro-zone economy seems to have continued regardless. But there is a clear risk of future contagion. And either way, mediumterm inflationary pressures are non-existent. While the Bank will continue to phase out its unconventional policy support, it will do so with caution. What’s more, we still see official interest rates on hold until at least the end of 2011.