Central banks have ‘King Canute’ theory of inflation, says former governor
theguardian.comCentral 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.
“This is the King Canute theory of inflation. A thousand years ago, King Canute of England set his throne by the seashore and commanded the incoming tide to halt. The tide continued to rise and dashed over his feet and legs, driven by the laws of nature,” the former governor said in a lecture to the Institute of International
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