A man sits on a bus as it passes the Bank of England in the financial district of the City of London. Picture: Reuters

London - British interest rates will start rising from their record low earlier than economists thought just two weeks ago, according to a Reuters poll taken after Bank of England Governor Mark Carney said they could rise sooner than markets expect.

Medians from the poll of 45 economists conducted on Friday suggest the first rise from 0.5 percent will come in the first three months of next year.

In a May 28 poll, economists' expectations had centred on the second quarter.

Only ten of those polled on Friday expect a rise this year.

Over a quarter of respondents brought forward their expectations, and some of those who had not changed their forecasts said they were under review.

“Carney's set piece Mansion House speech last night marked a significant change in tone on interest rates. He would not have chosen the words lightly, which makes them significant,” said Rob Wood, chief UK economist at Berenberg Bank.

Carney said Britain's economy still had scope to grow without pushing up inflation but there was little sign yet of the slowdown in the pace of expansion that the central bank had pencilled in for the second half of the year.

“There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” he said.

“It could happen sooner than markets currently expect.”

Until yesterday, financial markets, like recent Reuters polls, were not fully pricing in the first hike until 2015 but that has now moved to this year.

A slew of recent upbeat data mean market watchers have already tipped the BoE as the first major central bank to begin tightening policy in the wake of the global financial crisis.

Britain's economy is probably now bigger than its pre-crisis peak, and the recovery appears to be broadening out from its earlier reliance on consumer demand and housing-related sectors.

Still, the bank's Monetary Policy Committee is keen not to choke off the recovery and has long been at pains to stress that any rate rises will be gradual. According the poll, Bank Rate will only have risen to 1.50 percent by the end of next year.

In the May 28 poll, Bank Rate was expected at 1.25 percent at the end of 2015.

“Carney seemed to rubber-stamp the market curve of rates rising to 2.25 percent over the next three years. So if the tightening cycle were to start earlier than expected, the path might be more gradual than 25 basis points per quarter,” said Simon Wells at HSBC. - Reuters