Bank Of England's Carney Suggests A Rate Hike Could Come In The Spring

Bank of england mark carneyREUTERS/Peter MacdiarmidMark Carney, Governor of the Bank of England

Bank of England Governor Mark Carney signaled a U.K. interest rate hike could come in early 2015.

“Our latest forecasts show that, if interest rates were to follow the path expected by markets — that is, beginning to increase by the spring and thereafter rising very gradually — inflation would settle at around 2% by the end of the forecast and a further 1.2 million jobs would have been created,” Carney said at the Trade Union Congress in Liverpool.

Thanks to a respectable economic recovery, the U.K. stands to be the first of the major developed economies to experience tighter monetary policy in the post-financial crisis era.

Like many countries, the U.K. faces low inflation highlighted by low wage growth. One of the big concerns in monetary policy is that central bankers will pull dovish policy before wages are on a sustainable growth path.

“As employment approaches its new higher level, wage pressures should increase and capital investment should continue to recover,” Carney added. “Productivity growth should pick up bringing the higher, sustainable pay rises that British workers deserve.

“By the end of our forecast, we see 4% nominal pay growth on average across the economy. This is consistent with our inflation target and the economy’s potential.”

Read Carney’s whole speech at the Bank of England’s website.

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