Probably the biggest macroeconomic danger the world economy faces over the next two years is a rise in inflation. The problem is not inflation as such, undesirable as it may be, but the wider economic consequences of a rise in inflation under a regime of inflation-targeting central banks. A rise in inflation would trigger global interest rate increases, and this in turn could mark the beginning of a severe global recession.

There are many reasons to believe that this is not going to happen. Inflation forecasts are relatively optimistic. Central bankers also appear to be placing a lot of faith in measures of inflationary expectations, which show that all is well.