Bank of England Governor Mark Carney (pictured) has signalled a rate rise happening in the “relatively near term”.
Speaking to the BBC Radio 4’s Today programme this morning, he made one of his many hints at a rise but reiterated that increases would be gradual.
Carney said: “We can see that in coming months if the economy continues on this track, it may be appropriate to raise interest rates.
“We are talking about easing bit off the accelerator and interest increases when they come – if or when they come – will be limited.”
The Bank of England will next review the interest rate on November 2.
While the UK inflation rate is currently at 2.9%, up from the Bank’s 2% target, Carney said this was justified by the shock of the Brexit vote.
Raising the interest rate typically keeps inflation in check.
He added: “In exceptional circumstances like today when the economy is facing profound structural change, the MPC can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity.
“Monetary policy will be set to achieve the inflation target in a way that helps smooth real adjustment in the economy and supports jobs in the wake of very large external forces.
“Banks will be capitalised so that they can withstand any severe shock that could be associated with Brexit – however unlikely – and still meet demand for credit.”
He went on to say households could experience “short-term damage” to their finances “over the course of the next two to three years whilst it’s not yet clear what the final arrangements [for Brexit] are”.
However he played down suggestions UK households are over reliant on debt, saying Brits “have paid down a tremendous amount of debt”.