Britain could become the first major economy to tighten monetary policy since the 2008 financial crisis, Bank of England Governor Mark Carney has signalled, sending sterling shooting towards a five-year high against the dollar.

British government bond yields soared, construction stocks tumbled and interest rate futures priced in a first hike by December after Carney said rates could rise sooner than markets had thought – his most hawkish comment to date.

“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” Carney said in a speech alongside UK Chancellor of the Exchequer George Osborne.

“It could happen sooner than markets currently expect.”

Few economists had expected rates to increase until the second quarter of next year given the central bank’s previous guidance that there was plenty of scope for Britain’s economy to expand further without causing inflation.

A rise in BoE rates this year would be the first since 2007 and put it ahead of both the US Federal Reserve and the European Central Bank. While Britain’s economy is growing fast now, its recovery began much later than in the United States or Germany, and wages have fallen significantly in real terms since the financial crisis.