Mr Miles will probably have left the MPC by the time rates do finally rise, as the next meeting in August is his last.

In spite of Dollar rallying strong, pound has been able to hold its ground against it so far, which is pushing it higher against other currencies, such as Euro, Yen, Loonie.

That would suggest rates levelling off at around 2% to 2.5%.

“I expect that this will involve raising Bank Rate over the next three years from its current all-time low of half per cent”.

Carney said it would take time for the increase in interest rates to feed through into the economy, and that the peak impact would come around 18-24 months after the Bank’s nine-strong monetary policy committee made its move.

The remarks come after he and policy maker David Miles said Tuesday that the time is approaching to raise the key interest rate from 0.5 percent, where it’s been since March 2009.

Mr Carney said: “Short-term interest rates have averaged around 4.5% since around the Bank’s inception three centuries ago, the same average as during the pre-crisis period when inflation was at target…” Although rate rises will mean higher borrowing costs there is no reason to panic, as Mr Carney has repeatedly insisted that any rises would be “gradual and limited”. A rise in rates – which have been at the historic low of 0.5% for more than six years – had previously not been expected until the middle of 2016.

Carney said inflation pressures were now starting to firm again.

“The path is much more important than the precise timing of the first rate increase”.

“Inflation is likely to pick up from the latter part of this year, once the sizeable base effects caused by the collapse in oil prices begin to kick in”.

United Kingdom numbers showed consumer prices were flat in June after nudging up in May, as food and summer clothing prices fell. “The markets have brought forward their own timeline, but they’re obviously still somewhat skeptical that the turn of the year is a realistic call”, said Alastair McCaig, market analyst at IG, in a note.

Martin Ellis, housing economist at Halifax, said there was a “noticeable spike in optimism” after the result.

Carney said there had been a persistent pass-through from sterling’s strength into weak headline British inflation, adding that this was “particularly relevant” as the monetary policies of the euro zone and Britain diverge.

He said that with survey evidence pointing to solid pay growth “the risks associated with a deflationary mindset in the labour market have fallen significantly”.

“If this growth is to be sustainable then we need to see a comprehensive house building plan rolled out across the United Kingdom, and soon”.