Why King 'will not let inflation fall to 2%'

UK inflation will not be allowed to fall back to its 2% target because Mervyn King and his colleagues are keen to prevent a disinflationary spiral, according to leading fund managers.

Disinflation is when the rate of inflation slows, while deflation is when consumer prices fall. Although the official inflation target the Treasury sets for the Bank of England is for Consumer Prices Index (CPI) inflation to be at 2%, policymakers have missed it consistently since the financial crisis. CPI is currently at 2.8%, having dropped from 3% in April, the latest data revealed this week. Both Cazenove's Robin McDonald and Ben Lord at M&G expect inflation to remain above the 2% target for the foreseeable future, moving higher over the medium term as the impact of quantitativ...