Long-term UK borrowing costs have just hit their highest level in 27 years, in the latest blow for our beleaguered Chancellor. As I write, 30-year gilt yields have climbed above 5.5%. That\u2019s almost 20% higher than when Labour took power just over a year ago, when they were around 4.6%.<\/p>\n
Incredibly, it’s also the highest number since 1998. For a country with a massive \u00a33trillion debt pile, that\u2019s punishing.<\/p>\n
And there\u2019s little Rachel Reeves<\/a> can do to stop it, because this time the trigger lies in Washington. I warned a US financial storm was heading our way a few days ago<\/a>, and it’s already landing.<\/p>\n Last night we had confirmation that Donald Trump<\/a>\u2019s tariffs are driving up US inflation, and the UK government bond market is reeling from the shock.<\/p>\n US producer prices rose 3.3% in July, far above the 2.5% forecast, with tariff-hit metals and food leading the surge.<\/p>\n American businesses are starting to pass the costs on to domestic consumers, driving up prices. Where US inflation goes, ours tends to follow. As does the interest<\/a> we pay on our debts.<\/p>\n More than a quarter of UK government bonds, known as gilts, are inflation-linked, the highest proportion in the world.<\/p>\n This means rising inflation feeds directly into higher interest bills on our massive debt pile.<\/p>\n The UK borrowed \u00a320.7billion in June alone. Of that, an incredible \u00a316.4billion went on servicing the interest on money we previously borrowed.<\/p>\n That has nearly doubled in a year due to rising gilt yields. After this week’s jump, we’ll pay even more.<\/p>\n And that’s despite the Bank of England cutting rates five times since Reeves took office. Gilt yields should be sliding, not rising.<\/p>\n