(Bloomberg) --

Traders are betting the Bank of England will raise its key rate to 0.75% by the end of 2022 from 0.1% currently, in a bid to curb inflationary pressures.

Money markets now see 65 basis points of tightening by the BOE’s December 2022 meeting, according to sterling overnight index swaps. That will likely be spread out over three hikes, with an initial 15 basis point hike to 0.25% priced for February followed by an additional quarter-of-a-percentage point increase in May.

U.K. inflation surged more than expected to the strongest pace in more than nine years in August. Officials surprised investors last week when they left the door open for a potential rate hike as soon as November. 

While the central bank traditionally shifts its key interest rate by multiples of 25 basis points, it last cut rates by 15 basis points in March 2020, at the height of the coronavirus pandemic. If officials wanted to raise rates, a move back to 0.25% is seen by strategists as the likely first step.

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