The Bank of England’s governor says a rise in UK interest rates from their historical low is getting closer but that any increases in the cost of borrowing will be limited and gradual.

Dismissing suggestions that inflation's fall back to zero would prevent a rise in interest rates, Mark Carney said above-normal growth, rising costs and higher wages would prompt the bank to act in the months ahead.

He has spoken before about interest rate rises becoming more imminent, but his remarks yesterday nevertheless pushed sterling higher and brought forward financial market bets of higher borrowing costs.

The comments came after figures showed the consumer price index had zero annual inflation in June, following a brief rise in May to 0.1 per cent after Britain had entered deflation in April.