Aberdeen: Reeves could still positively surprise the gilt market

Aberdeen: Reeves could still positively surprise the gilt market

November 25, 2025

Monetary policy UK

By Matthew Amis, Investment Director – Rates Management, Aberdeen Investments

Chancellor Reeves could still positively surprise the gilt market on Wednesday. Having stepped back from income tax hikes, the market noise may yet be behind us – but Reeves has one trick left.

The one rabbit out of the hat could be the extent of the inflation busting measures. If Chancellor Reeves can materially lower inflation, then this could spark the Bank of England’s imagination when it comes to rate cuts in 2026. This would see gilts perform well on Wednesday.

If Reeves can lower the cost of living pressures we would assume this would be welcomed by the Labour backbenchers, and maybe the leadership discontent of recent weeks can reduce into year-end. Any perceived reduction in the simmering of tensions within the government would be welcomed by the long-end of the gilt market. 

The obvious risk to Reeves and the gilt market is that front-loaded costs to lowering inflation are paid for with a collage of backloaded tax hikes. Any material increase in gilt issuance in the coming years will not be well received.'

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