By Jonathan Cable

LONDON (Reuters) – Whether the Bank of England delivers a 75-basis-point increase in interest rates on Nov. 3 or goes for an even bigger lift to tamp down double-digit inflation is a close call among economists polled by Reuters over the past week.

Rising borrowing costs are part of a cost of living crisis hammering consumer spending as Rishi Sunak replaces Liz Truss to become Britain’s third prime minister in less than two months in one of the most turbulent periods in British political history.

Sunak has yet to say what his policies will be but is likely to retain Jeremy Hunt as finance minister, brought in less than two weeks ago to calm volatile bond markets, who ripped up most of Truss’s fiscal plans that played a large part in her speedy downfall.

A new budget is due to be published on Oct. 31. Some usual contributors declined to participate in the latest poll, taken largely before Sunak’s appointment, following the political and economic turmoil as like the BoE they are waiting for details.

“The silver lining to the political chaos is that the worst of the crisis in financial markets – and therefore the risks to the economy – now looks to be behind us,” said Bill Diviney at ABN AMRO.

Still, inflation was at a 40-year high of 10.1% in September, more than five times the BoE’s 2% target, adding to pressure on the central bank to act, a move which in itself would add to the burden faced by indebted consumers.

Annual price rises were expected to peak at 10.4% this quarter, the poll showed, before gradually declining, but won’t fall to target until at least 2025.

When asked what would happen to the cost of living over the coming six months, 12 of 17 respondents said it would get worse.

The median forecast in the Oct. 18-25 poll showed the BoE would take Bank Rate up by 75 bps to 3.00% next week. But while that was a view held by 18 of 30 respondents, 10 expected 100 bps, one said 125 bps and one said 150.

It was then expected to add another 75 bps in December and 50 bps next quarter before pausing, meaning rates would peak at 4.25% in the current cycle.

Both the European Central Bank and the U.S. Federal Reserve are expected to deliver 75-bps increases at their next meetings.

Markets are pricing in a 75-bps rise next week and see Bank Rate peaking at about 5.00% although Deputy Governor Ben Broadbent said last week “whether official interest rates have to rise by quite as much as currently priced in financial markets remains to be seen.”

“When Ben Broadbent speaks, we listen closely. We now think our forecast is more likely to be too high than too low,” said Samuel Tombs at Pantheon Macroeconomics, who currently sees rates peaking at 4.00%.

The Bank is due to begin quantitative tightening (QT) on Nov. 1, selling some of its 838 billion pounds stock of British government bonds acquired over more than a decade of crisis-fighting, from the global financial crisis to the coronavirus pandemic and its aftermath.

Economists were divided as to whether the Bank should delay its QT plans given the recent ructions in the gilts market, with nine of 17 respondents saying it should not and eight saying it should.

Britain is likely entering a recession and medians showed the economy would contract 0.3% this quarter, 0.4% next quarter, 0.2% in Q2 and 0.1% in Q3. Forecasts were largely revised down.

“The intensity of cost of living pressures and the fact that market interest rates are still above their pre-mini-budget levels mean we continue to think that the economy will shrink in H1 2023,” said Andrew Goodwin at Oxford Economics.

(For other stories from the Reuters global economic poll:)

(Reporting by Jonathan Cable; polling by Aditi Verma, Maneesh Kumar and Milounee Purohit; Editing by Ross Finley and Nick Macfie)