Central banks have ‘King Canute’ theory of inflation, says former governor

Mervyn King questions theory that inflation will remain low because we say it will'

Central bankers have been caught unawares by rising prices that have exposed their King Canute" theory of inflation, the former governor of the Bank of England Mervyn King has said.

In a strong attack on how policymakers around the world have reacted to the Covid-19 crisis, Lord King accused them of relying too heavily on models that showed inflation always coming back to its target whatever the level of interest rates.