Sound bites: UK rates set to go higher in the next 3 months.

The Bank of England might have passed on tightening this month, but the clock is ticking for higher rates. Tighter money is going to come a lot sooner than the market and consumers are expecting. Forget any notions that the BOE are going to wait until 2015. UK rates should be higher by the summer. There is a strong chance that the BOE will make a pre-emptive strike with higher rates in the next three months. They are going to go up fairly quickly from ½% to 3% at least. Governor Mark Carney has laid plenty of strong scent trails that rates are initially heading to the 3% level and UK consumers should better be prepared. All the monetary policy circuit-breakers are starting to engage. UK employment is picking up very sharply. UK trend growth is accelerating over 3%. And the UK housing market is showing tell-tale signs of boiling over thanks to all the Bank’s monetary generosity in recent years. The Monetary Policy Committee will be very uncomfortable with present trends and will be looking for a quick return to monetary normalisation. The advantage of raising rates this year is that it will not get bogged down with an election timetable in 2015. The next UK general election must be held by 7 May 2015. With UK rates set to rise, it can only be good news for a stronger pound, but bad news for UK exporters as competitiveness continues to suffer.