Global growth has slowed after a strong start to the year. This is partly due to the temporary effects of supply shocks, notably the surge in oil prices and the earthquake in Japan. But even as these shocks fade, the recovery will be held back by tighter fiscal policy and probably also by fresh financial shocks, both from the euro-zone and the US. With demand slackening, and commodity prices falling, inflation is set to peak during the coming months before falling, perhaps sharply, in 2012.