As far as most observers are concerned, Mark Carney’s speech at the Mansion House last Thursday boiled down to a single half sentence. The first rise in interest rates since July 2007 “could happen sooner than markets currently expect”, the Bank of England Governor uttered, to assembled City grandees and the wider world beyond. This sparked a frenzy of speculation that rates could start rising from their historic low of 0.5pc, where they’ve been since March 2009, sooner rather than later.
Before Thursday, the consensus expressed in bond and currency markets was that the first rate increase in almost seven years would happen early in the second quarter of 2015. Carney’s after-dinner bombshell changed that, with economists scrambling to update their forecasts.
The Bank of England is increasingly optimistic about the UK growth outlook. Britain remains on course to expand by a very punchy 3.4pc this year, Governor Mark Carney revealed last Wednesday, presenting the latest quarterly Inflation Report. Our economy, then, is now growing at its fastest pace since 2007, prior to the financial crisis. The Bank’s Monetary Policy Committee further upgraded its 2015 growth forecast, from 2.7pc to 2.9pc.
Over the next 2 and a bit years (9 quarters), UK GDP is set to rise at an annual average of no less than 3.1pc. This latest Inflation Report is among the most bullish the MPC has published since it was established 17 years ago. Britain is now moving “from a recovery supported by household spending to an expansion sustained by business investment”, according to Carney. “The economy has started to head back towards normal”.