Bank of England Governor: Interest rates will rise 'sooner than markets expect'

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Mark Carney says interest rates are likely to rise sooner than markets expect. Credit: PA

By Richard Edgar: Economics Editor

Back to normality. The Governor of the Bank of England has signalled tonight that the era of record low interest rates is soon to end.

Borrowing money has never been cheaper in Britain. The Bank cut rates through 2008 and 2009 to 0.5% and kept them there in an effort to stimulate an economy which had been knocked sideways by the global financial crisis.

But that emergency treatment could be needed no longer.

Speaking at the annual Mansion House dinner in the City of London, Mark Carney is about to say: “There’s already great speculation about the exact timing of the first rate hike and the decision is becoming more balanced.

"It could happen sooner than markets currently expect.”

Based on his previous warnings that raising rates too soon could kill off the recovery, most economists in the City expect the first rate rise in April next year.

Those forecasts are now wrong. That first move – likely to be a quarter percentage point rise – is now likely to happen sooner.

The Governor was at pains to repeat his message that whenever the Bank starts to put up rates they will do it in a gradual and limited way but he is preparing borrowers for an important fact: you've never had it so cheap and you won’t again for some time.