By David Milliken

LONDON (Reuters) – Britain’s central bank looks set to keep interest rates steady later on Thursday as it approaches the end-point of its 895 billion pound ($1.22 trillion) asset purchase programme and casts a wary eye over surging inflation pressures.

Investors are eager to find out if Monetary Policy Committee members (MPCs) join Michael Saunders from the external, who voted last August to stop the Bank of England’s year-long asset purchase program. The Bank of England made this commitment in November.

While the BoE plans to end quantitative easing before other central banks, half of its policymakers deemed that certain conditions for an increase in interest rates had been fulfilled in August.

The U.S. Federal Reserve announced late Thursday that it would reduce monthly bond purchases. It also indicated interest rate rises may come sooner than anticipated, as half its policymakers predicted an increase in borrowing costs by 2022.

The BoE raised its inflation forecast to 4% in August, reflecting rising energy prices and post COVID-19 disruptions.

Prices have increased across Europe over the past weeks. These increases had knock-on effects on household energy bills and food supplies.

It is important to determine whether or not the BoE begins to question the fact that the price rises have been temporary.

One concern is that rising inflation could cause longer-term inflation expectations to rise among the public. This would lead firms and workers to consider higher-than-target inflation in future pricing and wage decisions.

Citi released a monthly survey Tuesday showing the highest monthly growth in year-ahead inflation expectation in 15 years. It was done after August’s consumer price inflation hit an all-time high of 3.2%.

Citi economists warned that “this print could tip the balance of risk to the hawkish party for the MPC” Michael Saunders could be joined in voting to end asset purchases early. However, dissent about Bank Rate can’t be denied.

The MPC is now home to two new policymakers: Huw Pill (ex-CEO of the European Central Bank and Goldman Sachs) and Catherine Mann (ex-CEO for the Organisation for Economic Co-operation and Development), who will replace Andy Haldane.

Current interest rate futures project a greater than 60% probability that the BoE raises interest rates from 0.1% to 0.25% in February 2022. Then, there will be another rise to 0.5% at the end of 2019.

The majority of economists expect the BoE to wait and increase rates once more next year.

The BoE believes Britain’s economy will recover its pre-COVID-19 size by the end of the year. However, growth was slowed in July due to an increase in coronavirus infections. Business surveys indicate that momentum is difficult to regain.

Inflation is pushing the prices up, so furlough support payments and other welfare payments are ending for more than a million people.

($1 = 0.7340 pounds)