Fund managers forecast a modest growth in UK inflation after the consumer prices index remained unchanged at 2.7 per cent.
In its recent Inflation Report, the Bank of England said inflation is likely to remain above the 2 per cent target until 2015 and peak at 3.2 per cent.
Earlier this month Chancellor George Osborne called for the Bank to loosen monetary policy in order to boost the economic recovery.
PSigma Asset Management Income fund manager Neil Cumming, who co-manges the Income fund with Bill Mott and Eric Moore, says inflation has been a big concern for fund managers in recent months but he does not see a strong likelihood of it rocketing out of control.
He says: “We put a 55 per cent probability on [muddle through]. Another possibility is we get a deflation – which we give a 10 per cent chance – and the balance to that is there is a 35 per cent chance we would get inflation.”
Allianz Global Investors senior portfolio manager multi asset David Hollis says inflation is likely to rise to at least 3 per cent by the summer.
Hollis says: “To help steer the economy back onto a sustainable debt path the BoE has generated higher nominal growth in the UK by allowing inflation to run above target since 2010.“