Bank of England to announce rate decision at 1100 GMT
Markets expect rise from 5 to 5.25, risk of bigger move
Inflation dropped to 7.9 in June, still highest in G7
Governor Bailey to hold news conference at 1130 GMT

LONDON, Aug 3 Reuters The Bank of England is expected to raise interest rates to a 15year high of 5.25 from 5 on Thursday, though there is a risk of a repeat of June39;s surprise halfpoint increase as inflation remains the highest of the world39;s major economies.

The U.S. Federal Reserve and the European Central Bank increased rates by a quarter of a percentage point last week, but unlike the BoE, markets think they are at or near the end of their ratetightening cycle.

Bets on how high the BoE will go have swung in recent weeks as investors try to work out if Britain has a uniquely deeprooted inflation problem.

Market expectations for peak Bank Rate reached 6.5 on July 11 after data showed record wage growth before falling back to 5.75 after a sharp decline in consumer price inflation.

But at 7.9 in June, annual price growth is nearly four times the BoE39;s 2 target and more than double the U.S. rate.

Prime Minister Rishi Sunak pledged in January to halve inflation this year, a goal which now looks challenging.

Mortgage costs have hit their highest since 2008, weighing on housebuilding. A survey last week showed privatesector growth across the economy fell to a sixmonth low in July.

Investors see a twointhree chance of the BoE raising Bank Rate to…