The Bank of England is widely expected by economists and financial markets to impose the first back-to-back interest rate rises since 2004 when it meets to decide monetary policy this week.

With the central bank grappling with rampant inflation, BoE officials have not sought to quell speculation ahead of Thursday’s Monetary Policy Committee meeting that a rate rise is almost a certainty following the increase from 0.1 per cent to 0.25 per cent approved by the MPC in December. That was the first rate rise in more than three years.

In money markets, the probability of a rate rise this week to 0.5 per cent is priced at almost 90 per cent, and the majority of economists concur.

They are convinced the bank will need to act because it has failed to anticipate the extent and breadth of price rises under which consumer price inflation reached a 30-year high of 5.4 per cent in December.

Economists also think the BoE has underestimated the strength of the labour market, where job vacancies almost match the number of unemployed people for the first time since consistent records began more than 20 years ago.

Liz Martins, economist at HSBC, said data since the BoE increased interest rates in December required action to tighten monetary policy, as she also noted that the threat posed by the Omicron coronavirus variant seemed to be dissipating.

“The fourth quarter of last year saw the MPC’s biggest inflation forecasting error on record,” she said. “The main source of uncertainty in December, the Omicron variant, appears to be receding, with plan B restrictions [in England] now lifted.”

Pointing to the same reasons for the BoE to increase interest rates, Anna Titareva, economist at UBS, said: “There will probably be a strong majority in the [MPC], or even unanimity, in favour of a hike.”

BoE officials have said very little in the run-up to the MPC vote on Thursday, but when they have spoken, they have sounded hawkish. Bank governor Andrew Bailey acknowledged last week that energy prices might stay high for longer, keeping inflation far above the central bank’s 2 per cent target well into 2023.

Catherine Mann, an external MPC member, said this month that companies’ price and wage growth expectations were not consistent with hitting that target and monetary policy needed to “temper” those impressions.

The latest Citi/YouGov survey of the public’s inflation expectations shows people are more pessimistic about price growth in the coming year than at any time since 2006.

The BoE said last year that if interest rates rose to 0.5 per cent, it “intends to begin to reduce the stock of purchased assets”, a reference to the £895bn of gilts and corporate bonds the central bank has bought since the financial crisis under its quantitative easing programme to stimulate the economy.

It could reduce the stock and shrink its swollen balance sheet by not reinvesting money in further assets when bonds mature, but this is not an automatic move, with the MPC pledging in August to begin the process of quantitative tightening “if appropriate given the economic circumstances “.

This suggests the MPC’s nine members will have two votes on Thursday: one on interest rates and another on asset purchases.

Most economists think the MPC will vote to begin shrinking the BoE’s balance sheet, though Bailey told MPs last week that he expected any quantitative tightening delivered in this way “not [to] have that big an impact”.

George Buckley, economist at Nomura, predicted the BoE would end the reinvestment of money from maturing assets even though there was a large £28bn maturity of gilts due in March.

He said that if the economic conditions “were appropriate for a 0.25 percentage point rate hike they would also be for passive sales [of assets]”.

Amid the consensus about the MPC tightening monetary policy on Thursday, economists disagree about the number of rate rises likely this year and what level will be reached.

Financial markets have priced in four quarter-point increases in 2022, with rates almost touching 1.5 per cent by the spring of 2023.

Ruth Gregory, economist at Capital Economics, shared this hawkish stance, saying the MPC might well abandon existing guidance that it will impose only “modest” rate rises over the next few years.

“Inflation has risen far higher and far faster than the Bank of England forecast and the past month has brought further evidence the price pressures are broadening out,” she added.

But the majority of economists think the BoE will be more measured with its rate rises, hoping to shock people into believing it is serious about bringing inflation down without having to prescribe the painful medicine of markedly higher borrowing costs to limit spending.

Cathal Kennedy, economist at RBC Capital Markets, said the BoE could raise rates slowly because the combination of this and quantitative tightening would send a powerful message.

The BoE will outline its view of future rate rises in its forecasts on Thursday, based on market expectations for monetary policy.

If these show inflation projected to fall back to less than 2 per cent in the medium term, it will signal the bank’s view that financial markets have got too excited by assuming four quarter-point rate rises in 2022.

But if the BoE forecasts show inflation higher than 2 per cent in 2024-25, it would signal a radical shift inside the BoE towards sustained rate rises and its intention to defeat the most difficult inflationary episode since the early 1990s.