Yields on U.K. government bonds, or gilts, climbed to new multidecade highs on Thursday after Bank of England officials indicated concerns about the U.K. inflation outlook, increasing prospects of an interest-rate increase next month.

Ten-year gilt yields advanced to 5.527%, its highest level since 2007, LSEG data showed. Yields on 30-year gilts climbed to 6.047%, the highest since 1998.

BOE chief economist Huw Pill said on Thursday that central banks need to work on controlling inflation, according to Reuters. Pill voted in favor of a rate increase at the September BOE policy meeting. BOE monetary policy committee member Megan Greene said that U.K. wages could grow by around 3.5% in 2027, which was worrying, at a speech in Cape Town, South Africa, Reuters reported.

High pay growth could drive up inflation and raise the need for rapid interest-rate rises by the BOE.

Markets currently price in an 86% chance of a BOE rate hike in November, up from 83% earlier in the session, LSEG data showed.

Also speaking on Thursday, BOE governor Andrew Bailey said monetary policy requires "an unwavering commitment to returning inflation to target." The financial system has so far weathered the latest period of uncertainty, but lower growth, repeated supply shocks and changing market structures mean that resilience "cannot be taken for granted," he said.

Weak economic growth and rising borrowing costs are constraining public finances, causing investors to add a fiscal-risk premium on government bonds.

"Borrowing costs remain elevated amid fiscal and political uncertainty, highlighting the increasingly difficult environment for governments already struggling with weak growth and expensive debt servicing," Daniela Hathorn, senior market analyst at Capital.com, said in a note.

Rising oil prices and inflation concerns have pushed many global sovereign bond yields to their highest levels in years.

Gilt investors are cautious ahead of the U.K. budget statement due to be delivered on October 28, which will reveal the government's spending and revenue-generating plans.

The government could increase taxes to bridge the budget deficit, rather than significantly raise public borrowing, Ebury head of market strategy Matthew Ryan said in a note.

"If the [Treasury chief] leans more on spending restraint and targeted tax hikes, rather than borrowing more or loosening the fiscal rules, then sterling and gilts could emerge unscathed," he said.