Carney: Rate rise likely to become necessary

Speaking at the ECB Forum on Central Banking today, Carney said "some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional".

The depends, he said, on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations.

Carney continued: "When the MPC last met earlier this month, my view was that given the mixed signals on consumer spending and business investment, it was too early to judge with confidence how large and persistent the slowdown in growth would prove. Moreover, with domestic inflationary pressures, particularly wages and unit labour costs, still subdued, it was appropriate to leave the policy stance unchanged at that time."

Other members of the MPC, including Kristen Forbes and Andy Haldane, said last week that a gradual reduction in monetary stimulus is now warranted.

Speaking at the London Business School, Forbes said the UK is showing signs of being “behind the curve” in terms of adjusting monetary policy and that the “lift-off” of UK interest rates should not be delayed any longer.

Haldane, said that a tightening of monetary policy will be needed "relatively soon", stating that the process "would be prudent moving into the second half of the year".