The Governor of the Bank of England, Mark Carney, has validated the view that UK interest rates may rise earlier than previously expected. In a speech yesterday, Mr. Carney stated that “ could happen sooner than markets currently expect” implying that the consensus forecast for the first rise in interest rates expected to happen in March of 2015 is wrong. Solely based upon Mr. Carney’s statement, the new thinking is that interest rates will rise before the end of 2014 and consequently the world’s central banks will keep their eye on their UK counterparts for an example of how to exit extremely low or zero bound interest rates. Already the UK rates curve and Pound Sterling are reacting to this proclamation and it seems likely that both assets have further room to run in the months ahead.
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