LONDON, Feb 3 - By nearly every measure, Britain's economy is booming and economists say that means it's almost certain that its interest rates will rise again on Thursday. Last November, the Bank of England was the first major central bank to put up short-term borrowing costs following a period of falling rates around the globe. It looks increasingly likely to lead the pack again this week. The BoE's benchmark overnight bank lending rate is expected to climb to 4.0 percent from 3.75 percent when policymakers conclude their two-day meeting, according to 43 out of 46 economists polled by last week. There is scant evidence that the BoE's last quarter point hike did much to impede the sizzling British economy, which with growth at 0.9 percent in the fourth quarter was racing ahead at its fastest clip in over three years. "The continuing strength of the consumer sector means that attention is likely to quickly focus on when the Bank of England will next raise interest rates again after an anticipated 25 basis point hike on February 5," said Howard Archer, European economist at Global Insight in London. Cash registers were indeed ringing across the nation over the Christmas period, while rises in house prices and consumer borrowing have slowed only marginally since the Bank last put up rates. Even the manufacturing sector has suddenly come to life and has plans to expand capacity and jobs in the months ahead after a seven-year slump. Indeed, an interest rate hike has become so solidly cemented into expectations that not delivering one could upset financial markets. Even the government appeared to concede the need for a rate hike soon. Ed Balls, the Treasury's chief economic adviser, said on Tuesday he saw a consensus for a "forward-looking and pre-emptive approach" to monetary policy.
CURRENCIES THE WILD CARD
One argument against a rate rise is the weak dollar, which hit an 11-year low against sterling last month. The pound has been relatively steady on a trade-weighted basis but policymakers were already worried last month the dollar's recent slide against the euro could derail recovery in Britain's biggest trading partner -- the 12-member euro zone. Though the U.S. currency appears to have stabilised somewhat ahead of a crucial Group of Seven meeting this weekend, financial markets are increasingly nervous that if that does not issue a strong statement on currencies, the dollar's slide could start anew on Monday. The pound's rise so far should also temper the BoE's profile for inflation over the next two years but this will likely be more than offset by the surprising strength in domestic demand. The BoE's February Inflation Report next week is therefore almost certain to contain higher forecasts for both growth and prices. Inflation right now, at 1.3 percent, remains well below the Bank's 2.0 percent target but policymakers have already predicted an acceleration through this year Many analysts also hold the view the MPC is more inclined to adjust monetary policy during the same month as it publishes its quarterly Inflation Report -- what policymakers did the last time they raised rates. //