(Reuters) - Britain's National Institute of Economic and Social Research said it expects the Bank of England to start a sustained rate-tightening cycle on Thursday, which will lead to interest rates peaking at 2 percent in 2021.
NIESR's forecast is more hawkish than almost all the economists polled by Reuters last week, and comes a day before economists expect the BoE to raise interest rates for the first time in more than a decade.
Three months ago, NIESR brought forward its expectation for a first BoE rate rise to February 2018, at a time when most economists still expected the BoE to wait until 2019 before beginning to raise rates.
In September the BoE surprised markets by saying most of its policymakers expected to back a rate rise "over the coming months".
BoE Governor Mark Carney said this largely reflected a weaker outlook for productivity - which has stagnated in Britain since the financial crisis and reduced the rate at which Britain's economy can grow without creating excessive inflation.
Markets now see an almost 90 percent chance that the BoE will raise rates to 0.5 percent from 0.25 percent on Thursday.
However, most economists polled by Reuters do not see enough in the way of inflation pressures to justify raising rates now, and think a mix of muted price pressures and Brexit uncertainty make a further rate rise unlikely in 2018.
NIESR, however, on Wednesday said a weaker outlook for productivity meant the BoE needed to raise interest rates by 0.25 percentage points roughly every six months to keep inflation in check.