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ANALYSIS-Bank of England's "unreliable boyfriend" needs to get message right

LONDON, Oct 20 (Reuters) - For the Bank of England, the hard bit about finally raising interest rates will be getting borrowers to heed the message it is likely to send: that they should not fear many more hikes any time soon.

Britons have not seen their debt costs rise since July 2007, shortly before the financial crisis which pushed the world's fifth-biggest economy into its deepest recession in decades.

Now, eight years into the recovery, the BoE is saying it is likely to raise rates "in the coming months". Investors mostly say that means as soon as Nov. 2, after its next policy meeting.

At one level, increasing Bank Rate to 0.5 percent from 0.25 percent would represent only a reversal of last year's emergency rate cut after the shock Brexit vote.

But many British businesses are worried it might have an outsized impact on the mindset of consumers.

"When I have been around the country, businesses have been asking a lot about the Bank of England," said Rain Newton-Smith, chief economist at the Confederation of British Industry.

"There is nervousness about the psychological impact of the first increase."

The messaging challenge could be all the harder after several failed attempts in recent years by Governor Mark Carney and the BoE to signal when rates were likely to rise.

The guidance was repeatedly knocked off course by surprises in the economy, prompting one lawmaker to call Carney an "unreliable boyfriend" in 2014, an epithet that has stuck.

In June, sterling fell and then rose as Carney made two speeches in eight days in which he seemed to change the emphasis of his message away from being in no hurry to consider a rate hike to saying one might become necessary.

It remains unclear if the BoE will pull the trigger in November. Most economists polled by Reuters last month said the time was not right for a hike, yet they still expected the BoE to press on.

British inflation is at a five-year high of 3 percent, above the BoE's 2 percent target. But the economy is facing deep uncertainty about Britain's departure from the European Union and is growing at half the pace of the euro zone.

NOT THAT BIG A DEAL?

Paul Fisher, a BoE rate-setter until 2014, said raising rates once by 25 basis points was "not that big a deal".

"The key thing is what they say alongside it," he said. "The Bank has been out of the game ... in terms of affecting ordinary people's lives. It might suddenly become part of their consciousness again, especially the people who pay a mortgage."

The BoE has said repeatedly that it expects to raise rates in a "limited and gradual" way, echoing the caution among many other central banks about the fragility of their economies.

Economists say it will probably continue to send that cautious message after its first move.

Financial markets expect the BoE to make only one 25-basis point rate hike in 2018 after a first increase next month.

It remains to be seen whether British consumers, the main drivers of the economy, see it that way too.

"On the occasions when the Bank has tried to signal quite clearly that they're making just a one-off hike, households haven't listened to the nuanced guidance," Samuel Tombs, an economist with Pantheon Macroeconomics, said.

"They see their mortgage rates going up and they prepare for more increases in that direction."

When the BoE last raised rates in 2007, it said it had made no judgement on its next move. But the balance of households expecting a hike over the next 12 months stood at double the historical average a month later and consumer confidence fell, Tombs said.

BoE officials, like their peers around the world, have tried increasingly to find the best way to speak to borrowers.

In contrast to the days when central banks operated in near-secrecy and did not even publicly announce rate changes, Carney gives regular media interviews to speak directly to consumers and companies whose spending drives the economy.

But things do not always go to plan.

Carney has often had to challenge the idea that the BoE's guidance on rates represents a rock-solid promise. That nuance is often lost in media reporting, BoE officials complain.

"It's not always fully understood," the central bank's chief economist Andy Haldane told reporters after speaking at an event in London earlier this month. "When the data changes and the facts change, our view needs to evolve. That doesn't mean the view was wrong before. The facts sometimes change."

This time, however, even economists who think the BoE would be making a mistake by raising rates in November say it looks likely to happen, even if only to avoid another communications misfire that could further complicate its messaging task.

Jean Michel Six, chief economist in Europe for ratings agency Standard & Poor's, said the BoE ran the risk of losing credibility if it continued to hold off.

"It's a bit of a vicious circle. Once you go too far in the direction of saying you may very well increase rates, you have to do it. Otherwise you lose your credibility," Six said.

"It's a game you can only play for some time." (Editing by Catherine Evans)