Too slow off the mark when inflation started gathering pace towards the end of 2021, the Bank of England's belated campaign to raise interest rates now looks dangerously close to dumping the UK economy into an unavoidable recession.

Though legally independent of government interference when it comes to setting monetary policy, there is little doubt Andrew Bailey & Co have felt pressure to do whatever it takes to help deliver on Prime Minister Rishi Sunak's promise to halve inflation as we gear up towards next year's general election campaign. Members of the Bank's Monetary Policy Committee (MPC) headed by Governor Bailey are clearly content to manufacture a downturn to slow rising wages and inflation, but the escalating risk is that this will snowball into a punishing recession.

The Herald: Andrew BaileyAndrew Bailey (Image: Yui Mok)

Business lobby groups made clear their fears of another rise in the cost of borrowing when the MPC makes its next announcement on Thursday after this past week's news that wage inflation remained stuck at 7.8% during the three months to July, the highest since comparable records began in 2001.

Odds are that wage inflation figure will retain its Svengali-like influnce over the MPC, which has fretted incessantly about the effect of pay increases on inflation. But drill down a little deeper and the wage numbers are more dovish than they first appear.

Stripping out the public sector, private sector wages barely increased between June and July. And if you disregard the bonus element of recent public sector pay deals, wage inflation across government, the NHS and so forth falls from 12.2% to 6.6% - below the July inflation rate of 6.8%.

With unemployment up at 4.3% and the number of vacancies across the UK falling below one million for the first time in two years, there are clear signs that the red-hot jobs market is cooling. This doesn't scream the need to raise the base interest rate beyond the current 5.25%.

READ MORE: Redundancies on the rise as Scottish firms struggle

In fact, with the exception of inflation, pretty much all of the macroeconomic factors facing the UK point to a policy rate which is restrictive.

The economy is flatlining, as evidenced by figures on Wednesday from the Office for National Statistics (ONS) which showed that gross domestic product (GDP) fell by 0.5% in July versus the 0.2% decline expected by most economists.

That wiped out June's increase of 0.5% with all three key areas of the economy - services, construction and production - recording declines. More worringly, it was lower activity in the dominant services sector - which accounts for nearly 80% of UK economic output - that was the biggest factor in July's slump.

READ MORE: Recession jitters as economy shrinks more than expected in July

Yes, inflation is still too high. But as Mr Sunak knew fine well when he vowed to halve inflation by the end of the year, this is inevitably normalising as the spike in energy and food prices feeds through annual calculations.

The MPC is no longer in a clear space where rate hikes are unequivocally necessary, and some argue that they have already gone too far. With increases in the cost of borrowing taking many months to fully affect activity in the real economy, the UK looks to be in danger of an unstoppable recession.