The recent surge in the prices of agricultural commodities will put upward pressure on inflation well into 2011. But inflation in most major economies still looks set to peak some way below the levels seen in 2008, with reasons just as good now as then to expect sharp declines in a year or so. For the advanced economies at least, deflation remains a far greater medium-term risk than runaway inflation. Indeed, we expect average inflation in the G7 to fall perilously close to zero in 2012.
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