* Euro zone economy seen growing 1.1 percent in 2010
* Economists see less risk of double-dip recession
* ECB to hold rates at 1.0 percent until Q3 2011
By Jonathan Cable
LONDON, July 14 (Reuters) - The euro zone's economic recovery will likely just plod along, forcing the central bank to keep interest rates low, but the chance of a dip back into recession is fading, according to the latest Reuters poll.
Median forecasts from the survey of around 40 economists, taken over the past week, suggest quarterly growth will not exceed 0.4 percent per quarter from here through to the end of next year, unchanged from last month's poll.
"Moderate growth will persist for a while. The road ahead will look like a recovery but not like an upswing," said Jens-Oliver Niklasch at LBBW.
Economists kept their full-year growth forecast for the current year at 1.1 percent but trimmed their outlook for 2011 to a 1.3 percent expansion from 1.4 percent growth. That compares to 2011 forecasts for 2.0 percent growth in major trading partner Britain and 2.8 percent growth for the United States.
The 16-nation bloc's biggest economy, Germany, is expected to grow 1.6 percent next year while France is seen growing 1.3 percent.
The bloc escaped from its deepest recession in post-war history in the third quarter of last year, having pumped billions of euros into recovery packages. It is expected to have grown 0.6 percent in the quarter to end-June and fears of a double-dip appear to be receding.
But governments are now faced with the financial headache of having to slash budgets to recoup the cost of the bailout while simultaneously preventing a slide back into recession. Meanwhile 91 European banks facing stress tests designed to restore confidence in the financial sector have put a dampener on more optimistic forecasts.
But according to around 25 economists in the survey who answered an additional question, there is a only a 20 percent chance of a return to recession, down from the one-in-four chance given last month from a similar sample.
"With decent economic growth in the core countries -- mainly Germany -- a double-dip recession remains a risk and not a base scenario," said Juergen Michels at Citi.
A lower euro -- which has been battered by fears over the debts of Greece and other euro area members and hit a four-year nadir last month -- and low interest rates are likely to prop up the modest recovery for the time being, Michels added.
The sluggish growth path will not be helped by rising unemployment, expected to peak at 10.3 percent later this year. Euro zone unemployment held steady at 10 percent in May, slightly less than the 12-year high of 10.1 percent expected.
ECB ON HOLD
The outlook means the European Central Bank is not seen raising rates from their record low of 1.0 percent until July 2011 at the earliest, in line with a poll taken two weeks ago.
Benchmark interest rates are seen rising to 1.25 percent in the third quarter of 2011 and then rising by 25 basis points to end the year at 1.5 percent, the same as the last poll.
Inflation is seen averaging 1.4 percent this year and then nudging up to 1.5 percent in 2011, remaining significantly below the central bank's two percent target ceiling.
Data released earlier on Wednesday showed prices rose 1.4 percent year-on-year in June, compared to 1.6 percent in May. (Polling by Bangalore Polling Unit, additional reporting by Shivani Singh; Editing by Ross Finley and Stephen Nisbet)