Ample spare capacity and further falls in commodity prices should contain price pressures for the foreseeable future, even in those countries which are now experiencing a strong recovery. Meanwhile, several euro-zone countries are at risk of a period of deflation due to their high levels of unemployment, lack of competitiveness and continued private sector deleveraging. Japan, too, may relapse into deflation, once the effects of currency depreciation and indirect tax hikes have passed.
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