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BoE's Carney: Rates could rise sooner than expected

Bank of England Governor Mark Carney said late Thursday U.K. interest rates could rise sooner than investors expect – a surprisingly strong comment that sent sterling soaring.

"There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced," Carney said at the annual Mansion House speech. "It could happen sooner than markets currently expect."

Read MoreOsborne gives Bank of England new mortgage powers

Carney said BoE officials will closely watch the labor market to determine the right time to hike rates and will tighten policy slowly when they do begin to take action.

The British pound, also known as sterling, jumped over a cent in New York trade and extended those gains into Friday's Asian session to $1.6959 – its highest level in over a month. (Track currencies here)

"It's a very interesting comment from Carney to push through a more hawkish view and it actually came after the Chancellor announced the BoE would be able to use some more macro prudential measures to take away some of the housing market froth," HSBC Currency Strategist Dominic Bunning told CNBC.

Mark Carney
Simon Dawson/Bloomberg | Getty Images
Mark Carney

British finance minister George Osborne said on Thursday he would give the central bank stronger powers to curb mortgage lending and lower the risks posed by the housing market to financial stability.

Read MoreUK house prices creep up as London demand slips

House prices in the U.K. have risen by 11 percent over the past year and are close to levels seen before the global financial crisis. Last week, the International Monetary Fund said the U.K. should take steps to prevent the risks of a property bubble.

The BoE's main lending rate is currently at a record low of 0.5 percent.

Read More'Unsustainable' boom in UK property to cool by 2016

A rate increase this year would make the BoE among the first of the world's major central banks to tighten policy since the financial crisis. Most economists expect the U.S. Federal Reserve to move sometime in the middle of 2015.

On Thursday, New Zealand's central bank delivered its third rate increase this year to contain inflation.

"Our economists expect it [a U.K. rate hike] to come later than the market is expecting. The recovery is not sustainable and wage growth is still weak," said HSBC's Bunning. "So we're not getting ahead of ourselves just yet."

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