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.
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