Euro-zone and Japan yet to escape from deflation threat

Six years after the onset of the global financial crisis, there is still a threat of deflation. The biggestworry is in the euro-zone, where inflation expectations have slipped and the ECB’s actions stillappear too timid. In addition, the recent pick-up in headline inflation in Japan is largely due totemporary factors and may not be sustained. That said, there is little risk of deflation in the UK,where economic activity is expanding rapidly. And core inflation in the US, where the recovery isshifting up a gear, is likely to climb above the Fed’s 2% long-run target next year.