Sustained fall in inflation underway

Inflation will climb further in most major economies over the coming months, reflecting both higher

energy prices and higher food prices. The peaks should still be lower than those in 2008 as long as

the price of oil does not continue to rise. Headline inflation is also still likely to drop sharply in 2012

as the commodity effects unwind. But in the meantime, the drag on real incomes is another reason to

expect the economic recovery to disappoint, even if other central banks do not follow the likely lead

of the ECB and raise interest rates sooner than they would otherwise have done.