The world economy should expand steadily in the coming two years, helped by an increasingly strong recovery in the US. However, while the euro-zone has stabilised, it is not growing fast enough to resolve its deep-seated problems; and the jury is still out over the success of ‘Abenomics’ in Japan. There are no signs of a rebound in growth in the major emerging economies, although we do not expect a hard landing in China. Despite the gradual pick-up in growth, inflation is set to remain low. This should allow the Fed to withdraw its policy stimulus at a measured pace, while the Bank of Japan and ECB are likely to announce further policy easing.
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