Bank of England says it warned about rates because markets had not updatedTuesday 24 June 2014 15.54
Bank of England Governor Mark Carney said he had warned earlier this month that interest rates could rise sooner than expected because markets had not adjusted enough to strong British economic data.
He also said there appeared to be more slack in Britain's economy than previously thought.
But this needed to be balanced against economic growth showing more momentum than previously expected, he added.
A speech by Carney on June 12 sent sterling shooting towards a five-year high against the dollar and government bond yields soaring after he said that the first interest rate "could happen sooner than markets currently expect".
He told British lawmakers today that the speech was motivated by the fact that market expectations for the first rate hike appeared unmoved by a run of strong economic data.
"We'd like to see the market adjust to the data, just as our opinions are updating. We hadn't seen (that)," said Carney.
The Bank of England chief also said the economy had more momentum than the bank would have expected.
"We have to balance that against the possibility in my view that we could have more spare capacity to begin with," he added, pointing out that wage growth has been weaker than expected.
"The developments on the wage front suggest to me that there has been more spare capacity in the labour market than we previously had thought," he added.