The Bank of England has indicated that they may need to raise interest rates earlier and potentially faster than previously predicted.

The BOE held its first meeting of the year against the backdrop of an improving economy (the UK economy expanded by 0.5% relative to the consensus number of 0.4%) and relatively high inflation (3.1%).

Against this backdrop, the Monetary Policy Committee commented that if the economy were to continue on its current trajectory that "monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period". This news sent Sterling higher by 1 cent against the dollar.

With global inflationary pressures such as energy and food prices steadily rising, as well as the increasing prospect for wage inflation due to the unemployment rate being at its its lowest point for 40 years, it isn't surprising that the BOE are preparing the markets for the impact of rising rates.

Prior to this announcement the market was pricing in a 50% chance of a rate hike in May, when the BOE next updates its economic forecasts, however it is looking more likely after today's statement, that a May hike may be on the cards.

So, what does a potential rate hike mean for UK households and businesses? Well, it means that savers will likely see the interest available on deposits increase, but equally, if not more importantly, it will see the interest on loans, debt and mortgages rise.

The question is, how resilient are UK consumers and businesses to increasing rates? The BOE will hope that they can balance the need to control inflation with the risk of causing a shock to the economy.

In the press conference following the MPC meeting, Carney did offer some assurance stating that this interest rate cycle was going to be unlike those preceding 2008 where interest rates were at 5%, saying “We’re not talking about going back to those levels...and we’re not talking about going at that pace."

What the BOE does need however, is the flexibility to cut rates when the tougher times inevitably come, so it seems like a now or never moment.

Watch this space.