The Bank of England (BoE) Governor Mark Carney said on Thursday that the central bank could start raising its interest rate by the end of the year. He expects the interest rate to increase to about 2.0% over the next three years.

"It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages," Carney said.

The BoE governor noted that the central bank could change the timing and the size of any interest rate hike if there are shocks to the U.K. economy.

Carney added that skills shortages will lead to higher wage inflation.