BoE looks set to raise interest rates again

By Sumeet Desai

LONDON (Reuters) - Interest rates look set to rise to a six-year high of 5.75 percent later on Thursday.

Fifty six out of 70 analysts polled by Reuters last week predicted the Bank of England's Monetary Policy Committee would lift borrowing costs by another quarter percentage point at 12 p.m. - the fifth such hike since last August.

They reason that four policymakers, including Governor Mervyn King, wanted to raise rates in June. They were outvoted by the other five but that means only one of last month's doves has to switch sides for a rise this month.

Paul Tucker is considered the most likely turncoat. The central bank's executive director for markets voted to keep rates steady last month to avoid a surprise to the financial system. That argument doesn't stand anymore.

"The market is now pricing in over a 90 percent chance of a move tomorrow," said George Buckley, chief UK economist at Deutsche Bank.

TROUBLE AHEAD

Policymakers are worried about inflation -- companies are running at full capacity and looking to jack up prices. House prices are still rising fast even after a full percentage point of monetary tightening in the last year.

But many Britons could be in for a shock in the next few months. Many took out two-year fixed rate deals on their mortgages in 2005 when official rates fell to 4.5 percent and markets were pricing in more cuts ahead.