Reeves back from China with one eye on bonds and the other on economic data
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The chancellor will be monitoring the price of gilts after last week’s selloff and data to come on inflation and growth. Rachel Reeves will be back at her desk in the Treasury on Monday after her trade mission to China as markets reopen after last week’s bruising bond selloff and ahead of some key economic data on inflation and growth.
Officials will be monitoring closely moves in the price of government bonds, or gilts, after they were sold off sharply last week, pushing the 30-year yield – effectively the interest rate – to its highest level since 1998. City analysts said much of the shift related to changing market expectations about inflation and interest rates in the US ahead of Donald Trump’s inauguration, but there was also some evidence of concerns about the outlook for the UK.
If the selloff is sustained, it could force the chancellor to make adjustments to her tax and spending plans or risk breaking her fiscal rules. Fresh evidence of whether UK policymakers are struggling to see off inflation – one of the fears pushing down bond prices – will come on Wednesday, when the consumer price index data for December is released. Headline annual inflation rose to 2.6% in November, the highest level in eight months, from 2.3% in October.
Investors will also be watching the release of GDP data for November on Thursday to see whether fears of flatlining growth in the second half of 2024 have materialised. The Conservatives attacked Reeves for pressing ahead with her two-day visit to Beijing and Shanghai amid turmoil on the financial markets.
