Bank's rate verdict a tough call

By Sumeet Desai

LONDON (Reuters) - Will they or won't they? Wrongfooted several times before, financial markets are on high alert for another surprise Bank of England interest rate hike on Thursday.

Most economists say the central bank's Monetary Policy Committee will keep interest rates at 5.25 percent this month but after being caught out in January are not ruling out another quarter-point hike.

Eleven out of the 60 analysts polled by Reuters last month predicted the Bank this week would hike a fourth time since last August and take borrowing costs up to 5.5 percent.

In any case, if they don't raise rates now, they will in May, say the majority.

"The market remains uncertain of a hike tomorrow, currently pricing in around a 40-45 percent chance," said George Buckley, chief UK economist at Deutsche Bank. "We feel that a hike can be justified.

But markets may be going too far.

Last month's decision to leave interest rates unchanged at 5.25 percent was carried by 8 votes to 1. But the dissenter, David Blanchflower, wanted a cut -- not a hike.

True, the failure of arch-hawks Timothy Besley and Andrew Sentance to repeat their February call for a rate hike was probably a result of the equity market turmoil and that has now settled down.