Economists expect BoE to raise rates to 2.25 from 1.75
Markets think rise to 2.5 is likely, biggest since 1989
New UK PM39;s energy price caps will limit peak inflation
Fiscal stimulus may sustain longerterm price pressure
Fed hike pushes sterling to weakest since 1985 vs dollar

LONDON, Sept 22 Reuters The Bank of England looks set to raise interest rates by at least half a percentage point on Thursday in a bid to tame inflation that is just off a 40year high, against a backdrop of a tumbling currency and a freespending government.

Economists polled by Reuters last week expect the BoE to announce at 1200 GMT that rates will rise to 2.25 from 1.75, while financial markets have priced in a bigger move to 2.5.

The BoE is also expected to confirm that it will soon sell some of the 838 billion pounds 944 billion of government bonds which it bought during more than a decade of quantitative easing the first major central bank to do so.

The BoE39;s halfpoint increase in rates last month was its biggest since 1995. If it raises rates by threequarters of a point on Thursday it would be the largest hike since 1989, barring a failed, temporary attempt to shore up sterling in 1992.

The U.S. Federal Reserve increased its main interest rate by threequarters of a percentage point on Wednesday and signalled more large increases to come.

Sterling sank to its lowest since 1985 against the U.S. dollar after the Fed decision and is at its lowest against a basket of currencies…