While there is a strong consensus that the ECB's policy rate will have reached 3.5% by the end of 2006, the outlook for 2007 is much less certain. While ongoing economic recovery in Europe and the persistence of expected inflation above the 2% target ceiling point towards further normalisation in 2007, there are some external risk factors that may induce the ECB to pause at 3.5% or even, in some extreme scenarios, go into reverse. Accordingly, I consider the international dimension of the