Reeves Cost-of-Living Fiscal Headroom Eases on Trump Cancellation; Gilt Yields Slip to 5.02%, Brent at $96.50
Chancellor Rachel Reeves’s cost-of-living package faces an eased Friday-open macro backdrop as Brent crude pulled back to $96.50 on Trump’s Iran-strikes cancellation and gilt yields eased to 5.02%. Friends of Reeves believe there is a world in which she survives a Burnham premiership; the Friday relief rally partially offsets the structural war-risk premium. The October Ofgem price-cap reset depends on Brent staying in the $88-95 range through mid-summer; the current $96.50 trajectory is at the upper bound of that range.
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 around $96-97 will start to reverse the inflation-easing path through the second half of 2026 if the trajectory holds. The October Ofgem price-cap reset depends on Brent staying in the $88-95 range through mid-summer. The Bank of England MPC’s next decision later this month is the binding macro variable. The Treasury’s fiscal-headroom calculation eases marginally with the gilt-yield slip to 5.02% but remains structurally tight. The Iranian Hormuz-reestablishment closure is the binding pending macro variable.