Over its next two sessions, the Bank of England will raise the bank rate to 5.50%, according to economists.

According to analysts surveyed by Reuters, the Bank of England will increase borrowing costs 50 basis points more than anticipated only two weeks ago, in two quarter-point movements, as rising inflation proves more difficult to bring down than anticipated.

The central bank shocked investors last week by increasing interest rates by half a percentage point, bringing the Bank Rate to 5.00%. They also said "significant" news had emerged that suggested Britain's chronically high inflation would take longer to decline.

The 800,000 borrowers who still need to refinance this year and another 1.6 million homes the next year will have substantially higher repayments due to the already skyrocketing mortgage rates.

Following 25 bp increases at the BoE's August and September meetings, the median results of the poll conducted after the Bank's Thursday action indicated that Bank Rate is now anticipated to peak at 5.50% next quarter.

A survey conducted on June 14th predicted that policymakers will stop at 5.00% the following quarter.

"Unquestionably, something has changed. I believe they are losing faith and patience in their models because it's difficult to connect what they stated in May with their judgement in June, according to James Smith, developed markets economist at ING.

It was not anticipated that borrowing prices would decrease until the second quarter of 2019.

The day before the BoE's decision, official statistics showed that stubborn inflation defied forecasts of a downturn and kept steady at 8.7% in May. The previous poll indicated that it wouldn't reach the 2% objective until 2025.

Currently, markets are pricing in a terminal rate of 6.00%, which is higher than the median of the survey, but 31 out of 34 respondents to a follow-up question stated the greater risk to their terminal projection was that it peaked higher than they presently anticipate.

A 6.00% high was the basic assumption of just one economist.

Six of the top UK government bond dealers who took part in the most recent survey, known as gilt-edged market makers, reported a peak of 5.50%, while six others reported 5.75% and one said 6.00%.

In a poll of 52 respondents, 40 of them predicted that the Bank would slow the pace to 25 basis points on August 3 but estimated a high median 40% chance that the pace will increase by another 50 basis points.

(Sources: investing.com, reuters.com)