The Bank of England (BoE) has kept interest rates unchanged at its two-day meeting later today, but economists expect the first of several more 2004 credit tightenings in August.
Evidence has grown in the past month that the British economy is growing briskly. Economists say recent strong gains in manufacturing probably mean that the economy is growing at an even faster pace than what the BoE forecast just months ago.
Analysts now expect the Monetary Policy Committe to incorporate the recent sharp upward revisions to past years' growth into itsAugust Inflation Report projections as well as review official growth figures for the second quarter.
Financial markets are factoring in another 0.75 percentage point of rate rises before year-end to 5.25 per cent, particularly as the current tightening in the labour market is expected to push up wage inflation.
"Either way, plenty more rate hikes lie ahead," said Mr Michael Saunders, UK economist at Citigroup.