King wrong on inflation, managers warn

Several fund managers have warned the Bank of England is underestimating inflation in the UK, and they expect it to be higher for longer than predicted.

Inflation has been above the 2% CPI target for well over a year and recently hit 4%, causing the Bank of England to come under pressure to raise interest rates from a historic low of 0.5%, despite weak economic growth in the UK. Last week the MPC voted to keep rates on hold again, two years after cutting it to 0.5%, although many managers anticipate a 0.25% hike by May. King has warned inflation may well hit 5% and signalled there will be rate rises later in the year, but believes inflation will begin to fall back after that. Although some managers agree with this view, several sai...