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BoE prepared to hike rates before wage growth

The Bank of England may hike rates before real wage growth turns positive, even after the bank's inflation report last week suggested interest rates would stay at historic lows until at least 2015.

Last week, governor Mark Carney assured markets that increases in the bank rate, when they come are likely to be "gradual and limited" and Monetary Policy Committee expectations on a possible rate rise are "shared by markets."

Read MoreBoE tempers rate hike expectations on weak wages

Chris Ratcliffe | Bloomberg | Getty Images

The bank also revised its forecast for wage growth down to -0.25 percent for the year.

But Carney has now said we have to have "confidence that real wages are going to grow sustainably (before rates go up). "We don't have to wait for the fact of that turn to do so," he said in an interview with the Sunday Times.

Sterling was the main mover on the major currency on Monday after Carney's comments, gaining around 0.3 percent against the dollar trading at around $1.67, recovering from multi month lows.

Read MoreBoE eyes wage growth in rate hike riddle

Economists were split on rate rise expectations ahead of last week's press conference, but many felt a November rate hike was less likely following last week's report.

Deputy CIO and managing director at bond house Pimco said the outlook was lacking clarity as previously Carney had gone out of his way to talk up the possibility of a hike this year, but he seemed to push back on that in the press conference last week.

"Our best guess is that they will probably go in February, but given the back and forth I wouldn't be ruling out they go in November," he told CNBC.

Chief executive of U.K. Homebuilder Bovis said interest rate rises are "inevitable" in the current environment after the firm reported stellar growth for the first half of the year.

Read MoreProperty: The greatest risk to the UK economy?

U.K. property has seen double digit growth year on year and group CEO David Ritchie shrugged off fears of an impending rate rise.

"The reality of life is the economy is good health, we are seeing growth coming through, we are seeing clearly a strong housing market ," he said.

"Clearly the emphasis is on timing and if Mark Carney follows through with his comments on a gradual limited process, we feel that the market can deal with that," he said.

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave

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