On the day that the U.S. Federal Reserve will issue a decision on interest rates, policymakers in Britain are also grappling with rising inflation and interest rate decisions.

British inflation unexpectedly rose to 10.4% in February, pushed up by higher food prices and pricier drinks in pubs and restaurants.

Economists polled by Reuters had forecast that the annual CPI rate would drop to 9.9% in February from January's 10.1%.

The BoE is due to announce on Thursday whether it has raised interest rates for an 11th meeting in a row.

Investors are split on whether it will pause its run of increases in borrowing costs because of the recent upheaval in the global banking sector.

Interest rate futures showed a 100% chance that the BoE would raise rates by at least a quarter point, up from just over 50% late on Tuesday.

Overall inflation for food and non-alcoholic drinks rose to 18.0%, its highest since 1977.

Core CPI – which excludes energy, food, alcohol and tobacco and is watched closed by the BoE – rose to 6.2% from 5.8% in January, versus a forecast decline to 5.7%.

Compare that to the U.S., where CPI fell in February to 6.0% year-over-year.

Sixty-two percent of investors expect U.S. policymakers to continue hiking rates, which would mark the ninth straight increase, while 38% expect no change, according to CMS' FedWatch.

Chairman Jerome Powell has embarked on the Fed's most aggressive rate hike path since the 1980s to combat inflation.

Reuters contributed to this report.