We expect world GDP to grow by around 3% both this year and next. The US economy is set to recover steadily but the euro-zone recession will deepen, causing the sovereign debt crisis to flare up again and the euro-zone itself to begin breaking apart. Growth in the major emerging economies is likely to slow more gradually, except in emerging Europe, parts of which face recession. Against this backdrop, industrial commodity prices will fall a lot further. Headline inflation will also come down, though less steeply than seemed likely a few months ago. This will reduce the scope for further unconventional monetary policy this year although monetary policy will remain very loose in all the major economies.
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