We expect the major central banks to persist with ultra-loose monetary policy for at least two more years but inflation to remain at historically low levels. This is largely because global demand is likely to stay weak due to a combination of fiscal austerity, the euro-zone crisis and structural problems in several key emerging economies. Commodity prices should also fall back. In these circumstances, we forecast average inflation in the G7 to fall from 2% in 2012 to around 1% by 2014.
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