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Policy stimulus won’t boost inflation in the near term

The effects of demand weakness should continue to dominate those of supply constraints, leaving underlying inflation subdued in most parts of the world over the next few years. Policy measures including temporary VAT cuts will help to keep inflation low in the near term, particularly in Europe. And monetary stimulus seems unlikely to stoke inflation while virus fears keep firms and consumers in cautious mode. But it does carry longer-term risks for some EMs and to a certain extent the US.

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