Reeves Cost-of-Living Fiscal Headroom Eases Materially as Gilt Yields Break Below 5%; Brent at $94.50
Chancellor Rachel Reeves’s cost-of-living package faces a materially eased Wednesday-close macro backdrop as Brent crude fell to $94.50 on Trump’s “progress toward nuclear talks” framing and UK 10-year gilt yields fell below the 5% line at 4.99% for the first time since Friday. Friends of Reeves believe there is a world in which she survives a Burnham premiership; the Friday MP lobbying for Reeves-continuity makes that scenario more credible. The October Ofgem price-cap reset is now back inside the $88-95 Brent range trajectory.
The 5p fuel-duty extension cancellation is locked until 31 December 2026. Inflation has slowed to 2.8% — the lowest in over a year. With Brent at $94.50, the inflation-easing path through the second half of 2026 holds. The October Ofgem price-cap reset depends on Brent staying in the $88-95 range through mid-summer; the current $94.50 trajectory is back inside that range. The Bank of England MPC’s next decision later this month is the binding macro variable; if Brent stays below $95 through next week, the next rate cut remains priced in. The Treasury’s fiscal-headroom calculation eases directly with the gilt-yield retracement below 5%.