By David Milliken

LONDON (Reuters) - The Bank of England looked set to keep interest rates at 4.75% on Thursday, despite signs of a slowing economy, as persistent inflationary pressures prompted it to "gradually" reduce borrowing costs. restrict access to

All 71 economists polled by Reuters said rates would remain unchanged for now. Most expect only a quarter-point cut on Feb. 6 after its next meeting, followed by three more cuts through the end of 2025.

Financial markets are less certain about the extent of rate cuts next year, after Tuesday's data showed an unexpected acceleration in wage growth. Investors late on Wednesday priced in just a 50% chance of a rate cut in February and just two cuts overall in 2025.

In contrast, the European Central Bank has cut rates by 1 percentage point in 2024 and markets expect them to cut by another percentage point in 2025 as the euro zone economy is weighed down by political turmoil and the risk of a US trade war. .

Divergence in interest rate outlooks has pushed the British yield gap to its widest since 1990.

While the US Federal Reserve expects to cut rates only twice next year, its rate cuts on Wednesday added to a cumulative 1 percentage point of easing in 2024, double the BoE's pace so far.

Governor Andrew Bailey confirmed the BoE's message this month that "a gradual approach to the removal of policy restraint remains appropriate".

The BoE's November forecasts - which kept inflation above the 2% target until 2027 - were based on market expectations of four rate cuts next year.

BoE officials have not been clear on whether they see this pace of cuts as the most likely scenario.

Economists expect the BoE to stick to its unequivocal message of easing in the December policy statement.

Bank of America analysts said in a note to clients, "We think it is too early for the BoE to pre-commit to a sustained cutting cycle or to conclude that it will stabilize at a target of 2% over the medium term. The risks of rebound inflation have been eliminated." .

Most economists polled by Reuters expect an 8-1 Monetary Policy Committee vote to keep rates unchanged. Swati Dhingra, who has called for faster cuts, is seen as the most dissenting.

Inflation and wage growth are high

British consumer price inflation - which was at a 41-year high of 11.1% in October 2022 - fell below the BoE's 2% target for the first time in three-and-a-half years in September, but rose to 2.6% in November.

This exceeded the BoE's own forecast of 2.4% and was the highest rate among the Group of Seven advanced economies. Services price inflation, which the BoE sees as a better guide to medium-term price pressures, is pegged at 5.0%.

The biggest concern is wage growth, which reached an annualized 5.2% in the three months to October - well above the 3% rate most MPC members consider consistent with 2% inflation.

The BoE is watching to see if Finance Minister Rachel Reeves' decision to load an extra 25 billion pounds ($32 billion) in employment tax on businesses leads to further price rises or cuts to jobs and wages.

Business sentiment has declined since Reeves' Oct. 30 budget, and economic output has declined for the first two months in a row since 2020.

However, most economists say it is too early to know whether the slowdown will put much downward pressure on inflation.

"We don't think there is enough in the data to shift the MPC from its cautious, dovish tone," said RBC economist Cathal Kennedy, adding that new BoE forecasts will be key at its February meeting.

($1 = 0.7882 pounds)