A decision on an interest rate hike – the first since the financial crisis – will be made by policymakers at the end of the year, Bank of England governor Mark Carney said in a speech on Thursday.
The UK's economic recovery has sparked anticipation of an interest rate rise from their historic low at 0.5 per cent, and recent public statements from Carney have fueled optimism that growth will trigger a rate hike.
In a speech in Lincoln on the Magna Carta, Carney signalled that the economy has "been growing above trend for a year" and that "unemployment has fallen sharply" but also pointed to "international risks" such as the precariousness of Greece and China's slowdown.
In my view, with the healing of the financial sector and the lessening of some of the headwinds facing the economy, that concern has become less pressing with the passage of time…In the current circumstances there is no need to wait to raise rates because of a risk management approach and run the risk of inflation overshooting target.
In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.
In light of the speech, economists at IHS Global Insight forecast that the Monetary Policy Committee (MPC) central bank will lift rates from 0.50 per cent to 0.75 per cent in February 2016 but admitted: "We have become markedly less confident in this call and there is clearly now a very real possibility that the MPC could act before the end of 2015, most likely in November."