The euro-zone is slipping into a recession which we expect to be deep and prolonged and to result in the break-up of the single currency area. This will be a major drag on other European economies. The US will be less affected, but we expect its growth rate to drop as the effects of previous stimulus fade. Emerging economies will slow more gradually and have room for policy stimulus. Against this backdrop, and with commodity prices weakening, inflation is set to fall sharply.