British government bond yields soared, construction stocks tumbled and interest rate futures priced in a first hike by December after Carney said rates could rise sooner than markets had thought — his most hawkish comment to date.
"There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced," Carney said in a speech late on Thursday alongside British finance minister
"It could happen sooner than markets currently expect."
Few economists had expected rates to increase until the second quarter of next year given the central bank's previous guidance that there was plenty of scope for
A rise in BoE rates this year would be the first since 2007 and put it ahead of both the US Federal Reserve and the
"The change reflects the reality in the economy. It is flying now. Employment is rising at a record pace and we see no sign of economic growth slowing from its current pace," said
The pound hit a 5-1/2 year high against a trade-weighted basket of currencies and was just a fraction below an almost five-year high against the dollar. Short sterling rate futures fell, pricing in the first hike by December. The interbank interest rate curve also pointed to a rate rise by the end of the year, compared with the first quarter of 2015 on Thursday.
Osborne, meanwhile, said he would grant the BoE new powers to impose maximum loan-to-value and loan-to-income ratios on mortgage lending, a step which Carney welcomed.
AA+ bond grade affirmed
"Favourable macroeconomic trends, including strong GDP growth, falling unemployment and inflation close to the two per cent target, have continued in the
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