By Sarah Taaffe-Maguire, business and economics reporter
The cost of UK government borrowing has surpassed the level seen at the mini budget and hit a high last seen in 2008.
Shock at the prospect of consumers paying £332 more on their energy bills from July has sharpened fears over how much inflation, the overall rate of price rises, will go up.
As some economists envisage circumstances where inflation could reach 5%, up from the current 3%, traders are pricing in three interest rate hikes this year.
If they come to pass, these hikes, expected in April, July and November, will bring the base borrowing cost to 4.5%.
The government’s borrowing cost, as well as news this morning that borrowing cost the state £5bn more in February than a year earlier, led investors to demand more to lend to the government.
As a result, the interest rate, or yield, the government pays on loans issued to it for 10 years, known as gilts, hit 4.9% on Friday afternoon, the highest level since the financial crash.
It is the interest rate on these 10-year loans that is the benchmark for government borrowing costs.
With the public finance news today, we already knew the difficulties posed to Chancellor Rachel Reeves and how the UK is exposed to price shocks as she attempts to stick to her self-imposed fiscal rules to bring down state debt and balance the budget by 2030.