LONDON, Sept 17 - The Bank of England is likely to hike interest rates once again this week, possibly the last hurrah for one of the great tightening cycles of the last 100 years as a cooling economy begins to worry policymakers.
If Bank Rate does peak at 5.5% - from a starting point of 0.1% - it would rank fourth on the list of Britain's biggest tightening cycles of the last century, behind surges that took place in the late 1980s and in the early- and late-1970s. Economic output in July dropped more steeply than expected, even if one-off factors like strikes were behind some of the fall, and the unemployment rate has already overshot the BoE's forecast for the third quarter as a whole.
"While we expect the critical mass of the committee to be grouped around a 25 basis-point hike, the uncertain, finely balanced nature of the turning point in the cycle means we believe there will be dissenters on both sides," said Jack Meaning, chief UK economist of Barclays.Inflation figures for August due on Wednesday are likely to buck the falling trend thanks to rising petrol prices.
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