LONDON — The Bank of EnglandThursday’s meeting of the Monetary Policy Committee is to be decided on whether to lift interest rates.

Although policymakers indicated that an imminent hike was possible, the MPC, which consists of nine members, will have to decide whether it should tighten its policies this week or wait for its mid-December meeting. This is in view of persisting above-trend inflation, and moderate growth.

The timing of the election is uncertain, and analysts suggest that it will be split. While some BOE policymakers like Governor Andrew Bailey or Michael Saunders have suggested that an immediate increase could be supported, others seem more cautious.

Silvana Tenreyro indicated recently that she would need to see further labor market dataFollowing the Sept. 30 end to the U.K.’s furlough system, it was time for the U.K. to vote on the way toward policy normalization.

Market data on Monday showed that traders priced in 64% of the possibility of a 15-basis point rate increase this week. Berenberg noted in Tuesday’s note. Kallum Pickering, senior economist, said that his team believes a Dec 1st rate increase “slightly less likely”, but that a hike this week is unlikely.

Pickering pointed out that a 15-basis point increase in the base rate from the historic low of 0.1% would maintain monetary policy as loose as possible, but could have an impact on expectations of rate changes, which have changed dramatically over the last month.

He stated that the market had already seen the March 2022-November 2021 hike, and now it expects the Bank Rate rise to 1.25% before the end of 2022. Then there will be 40 bps cuts between mid-2023 and end-2025.

The market is predicting a BoE policy mistake in the next years, in the form over-tightening of 2022. This needs to be rectified with moderate rate reductions thereafter.

Berenberg thinks that a December 16th move will be followed by an increase of 0.75% to the end in 2022. Additional hikes are expected to take the Bank rate to 1.25% about a year later than market forecasts.

Berenberg anticipates that, regardless of the Bank raising rates on Thursday night, the MPC would send a clear signal through its forward guidance.

It is not easy to get tighter.

MPC’s biggest headache is the unique nature pandemic recovery. This means that policies can change as new data comes in, especially with regard to inflation and growth.

Inflation in Britain slowed in September unexpectedly, with a 3.1% annual increase, however analysts believe this will be a temporary respite. The August 3.2% increase in annual inflation was the largest increase since records beganThe Bank exceeded its 2% goal by almost a third in 1997.

After a surprise contraction of 0.1% during July, August’s GDP growth was 0.4%. This is due to an increase in staff absenteeisms related to the Covid-19 Delta variation.

Gurpreet Gill, macro strategist global fixed income, Goldman Sachs Asset Management said, “Like many major economies, the U.K. faces significant supply bottlenecks” and an uncertain inflation outlook.

Gill noted that high job vacancies are a sign of a tight labor marketplace, which is favorable to higher wages. However, hours worked and labor force participation rates indicate significant excess capacity. U.K. job vacancies hit a record 1.1 millionIn the three-months to August, unemployment rates were lower.

A decline in immigration due to Brexit or the pandemic may cause longer-term problems for the U.K.’s labor supply, as compared with other major economies.

Gill explained that “all eyes will be on the forthcoming MPC meeting – including inflation anticipations and business sentiment.”

When the MPC’s data is extremely volatile, it is likely that the path towards monetary normalization will not be straight.

Analysts are generally in agreement that the Bank must follow market expectations and raise its policy screws, regardless of whether it happens on Thursday or December.

Michel Vernier of Barclays Private Bank’s fixed income strategy said that the BOE may have to revise up its expectations for inflation rising to 4%. Supply chain problems seem to become more persistent and oil prices are under constant upward pressure.

Vernier however stated that the inflation rate is “very likely” will moderate rapidly once there has been a close to the pandemic-induced gap in output.

He stated that “Inflation could now be also capped with early hikes. Which may leave the BoE open to reversing their decision at a later stage, if persistently excessive inflation doesn’t materialize.”

“The BoE has made recent remarks about the urgent need for action. This indicates that consumers seem to have a greater emphasis on protecting them from higher inflation. The GFK consumer sentiment was recently consolidated. Higher mortgage rates could add further pressure.

Barclays Private Bank has also been betting on a December increase, though a further 50 basis points hike is possible by mid-2022.