The Bank of England will most likely unveil the biggest hike in interest rates for over three decades when its decision-makers meet on Thursday.
The Monetary Policy Committee is expected to raise interest rates by 0.75 percentage points to 2.5%.
It would be the UK’s highest interest rate since the financial crisis.
The base rate was reduced from 3% to 2% in December 2008.
It would also be the largest single rate increase since 1989.
“Investors think the most likely outcome is that the MPC will increase the bank rate by 0.75 percentage points on Thursday,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
However, he stated that economists anticipate a smaller increase, to 2.25% – the same 0.5 percentage point increase as the bank’s previous hike.
“For a start, hawkish surprises from the MPC have been far less common than dovish ones over the last year,” he said.
“In addition, Governor Bailey openly referred to a 0.50 percentage point hike ahead of the August meeting but has not given markets a nudge to price in a 0.75 percentage point hike.
“We think that the MPC still will deem a 0.50% increase to be consistent with its pledge to act ‘forcefully’ if it sees signs of more persistent inflationary pressures.”
ING economist James Smith said that the Bank of England would have to react to recent falls in the price of the pound.
Sterling hit a new 37-year low against the dollar on Friday.
“The Bank of England meeting is crucial,” he said.
“It will tell us not only how worried policymakers are about the slide in sterling and other UK markets, but also how the Government’s decision to cap household/business energy prices will translate into monetary policy.”