The world economy is likely to grow at a similar pace this year as in 2012. Some downside risks have diminished, at least for now, including the threat of euro break-up, the US fiscal cliff and a “hard landing” in China. But even if the euro-zone holds together it is sinking into a deeper recession, while the recoveries in both the US and China are likely to be weaker than many expect. Against this backdrop, global inflation should remain subdued, allowing central banks to persist with aggressive monetary expansion.
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