Mark Carney allays fears of 30s-style deflationary spiral

Governor of Bank of England says resurgent UK economy means inflation should return to target within two years but not before sinking further

Mark Carney, the governor of the Bank of England, has sought to allay fears that Britain faces a 1930s-style deflationary spiral after inflation fell last month to 0.3%, saying that the strength of the UK recovery meant inflation would return to its 2% target within the next two years.

In a speech to business leaders in Sheffield, Carney said that despite being buffeted by global forces pushing down prices, the return of inflation-busting wages would push up domestic demand and prices, forcing Threadneedle Street to raise interest rates.