Pound jumps on BoE Governor Carney's remarks

The timing for an increase in bank rate is edging closer, the Governor of the Bank of England said on Tuesday.

Mark Carney was speaking before the Treasury Select Committee.

Interest rates in the UK have a tendency to rise more gradually than their counterparts in the US, Carney added.

In an immediate reaction cable jumped to 1.5603 and as of 11:05 was trading up by 0.68% to 1.5585.

“The point at which interest rates may begin to rise is moving closer given the performance of the economy”, the BoE's chief said, albeit adding a caveat, as analysts at BNP Paribas pointed out: "there will inevitably be shocks and adjustments”.

For his part, David Miles, another one of the MPC's members who was testifying before the committee said: "I don’t believe for a minute that the new normal is near the zero-bound.”

"Overall, we judge these comments as supporting our view that the Bank is likely to deliver the first rate hike earlier than the current market pricing of May 2016. Our forecast is for a February 2016 move.

"The tendency for sterling to strengthen whenever the rates markets start to price in more tightening is likely to be a constraint on moving earlier, as are the likelihood that the Fed will wait until December before delivering its first rate hike of the cycle and the risks surrounding Greece," Dominic Bryant from BNP Paribas said in a research note e-mailed to clients.