Central banks keep the markets on their toes

A famous quote attributed to the great British economist John Maynard Keynes goes, "when the facts change, I change my mind". It would seem that Bank of England governor Mark Carney takes a similar view.

The Bank of England has spent much of the past year dampening down market speculation about possible rises in UK rates, notably through its forward guidance policy proclaiming that rates could remain low.

However, in a speech last Thursday, Carney caught markets off guard by warning that UK rates could rise sooner than expected, given recent strong economic data. His comments gave sterling a significant boost but weighed heavily on the gilt market and UK stocks.