Reeves Cost-of-Living Fiscal Headroom Closes Week at 5%-Line Resistance; Brent Below $96
Chancellor Rachel Reeves’s cost-of-living package closes the week with gilt yields back at the 5.00% line and Brent crude eased to $95.80 a barrel. Sterling firms to $1.3415. Friends of Reeves believe there is a world in which she survives a Burnham premiership; the week-end macro recovery partly eases that calculation but the structural Iran impasse continues. One Labour MP close to Reeves: “The biggest fear for the bond markets and the unions is Ed Miliband.”
The 5p fuel-duty extension cancellation is locked until 31 December 2026. Inflation has slowed to 2.8% — the lowest in over a year — but Brent staying in the $95-100 range will start to reverse the inflation-easing path through the second half of 2026. The October Ofgem price-cap reset depends on Brent staying in the $88-95 range through mid-summer; the current $95.80 trajectory points to a marginal price-cap rise rather than a roll-back. The Bank of England MPC’s rate-cut path is uncertain; the next decision in two weeks is the binding macro variable. The Treasury’s fiscal-headroom calculation tightens directly with the gilt-yield holding at 5%. Burnham’s allies have floated Energy Secretary Ed Miliband as his potential chancellor; Reeves’s allies counter that Miliband “would not be trusted by the bond markets”.