FX.co ★ UK Gilt Yields Near 19-Year Highs as Inflation Risks Rise

The UK 10-year gilt yield held at 5.2%, hovering near its highest level in 19 years as investors increasingly priced in the likelihood of additional Bank of England rate hikes amid renewed inflation concerns. Brent crude briefly reached $100 a barrel, and UK natural gas prices rose to their highest level since late 2022, as escalating tensions in the Middle East intensified worries over energy supply disruptions. Markets are now fully pricing in a 25 bp BoE rate increase by December, followed by two further hikes in 2027. However, at the upcoming meeting on September 17, policymakers are widely expected to keep interest rates on hold. Addressing lawmakers in Parliament on Tuesday, BoE Governor Andrew Bailey pushed back against the idea that another rate rise is inevitable, emphasizing that any decision would depend on evolving economic and geopolitical conditions. At the same time, MPC member Megan Greene cautioned that a sustained oil-price shock could entrench inflation expectations further.