By Jonathan Davies
"The point at which interest rates may begin to rise is moving closer," the governor of the Bank of England has said.
Speaking to the Treasury Select Committee, Mark Carney, said: "Once rates begin to adjust, we expect for those adjustments to be at a gradual pace and to a limited extent."
Interest rates have been at the record low of 0.5% since March 2009 and the market analysts do not expect rates to go up until at least next year.
Mr Carney said "consistent growth above trend, a firming in domestic costs, counter-balanced by disinflation imported from abroad" would lead to an increase in interest rates.
But the governor of the Bank of England warned that rates would not return to levels seen before the financial crisis.
"I do think there are a variety of factors that mean that the new normal, certainly over the policy horizon over the next three years, is substantially lower than it was previously," he said.
"I see no scenario in which they would move towards historic levels."
The value of the pound jumped by one whole cent against the US dollar following Mr Carney's comments.