The Bank of England looks poised to raise interest rates on Thursday for the fourth time since December, the fastest increase in borrowing costs in a quarter of a century as it tries to quell the danger from the leap in inflation.
But the BoE must tread carefully to avoid a recession, even with inflation at 7% - more than three times its target - and still rising.
Last month Governor Andrew Bailey said he and his colleagues were walking a "very tight line" to steer the world's fifth-biggest economy through the global post-pandemic inflation surge which has been aggravated by Russia's invasion of Ukraine.
A day after the U.S. Federal Reserve raised its benchmark rate by half a percentage point - its biggest hike since 2000 - to a range of 0.75 to 1.0%, Britain's central bank is expected to announce a quarter-point increase, taking Bank Rate to 1.0%.
It was the Fed's second increase in borrowing costs since the pandemic whereas the BoE's expected hike would be the fourth in a row and raise Bank Rate to its highest since 2009.
Investors on Wednesday priced in a less than one-in-three chance of a Fed-style, half-percentage-point hike by the BoE.
Sterling has languished around a 21-month low against the dollar on worries about the British economic outlook.
"Having been one of the most hawkish central banks at the beginning of the year, the Bank of England has more recently turned into a reluctant hiker," said Peder Beck-Friis, a portfolio manager at bond trading giant PIMCO.
Signs of a slowdown - and even a possible recession - are mounting with consumer confidence close to a record low and retail sales falling two months in a row as the cost-of-living squeeze tightens.
"Nevertheless, we expect the Bank of England to continue hiking as long as the labour market remains tight and inflationary pressures are firm," Beck-Friis said.
Like the Fed, the BoE is expected to say on Thursday how it plans to start selling down the huge stockpile of bonds that it has bought since the global financial crisis over a decade ago.
Selling hundreds of billions of pounds' worth of government bonds would be another way for the BoE to tackle inflation, which looks on course to have approached 10% in April.
But the BoE might send a signal to investors on Thursday that they are banking on too many future rate hikes.
In its previous set of quarterly forecasts in February, the BoE said inflation in three years' time would be only 1.6%, a long way below its 2% target, if it raised borrowing costs by as much as financial markets expected.
Since then, investors' bets on rate hikes have increased and on Wednesday they were pointing to Bank Rate more than doubling to 2.25% or 2.5% by December.
The BoE said after its last meeting in March that "some further modest tightening might be appropriate in the coming months", having previously said it was likely.
Economists polled by Reuters mostly expect Bank Rate to rise to 1.5% by early 2023 and stay there throughout the year.
They also expect an 8-1 vote by the BoE's nine rate-setters at their May meeting for an increase in Bank Rate to 1.0%, with one dissenter, probably Deputy Governor Jon Cunliffe, in favour of leaving rates at 0.75%.