UK Wage Hikes May Boost Tax Revenue by £9bn, Easing Fiscal Buffer Pressure Amid Inflation Risks

English summary

UK 10-year gilt yields rose to 5.4%, increasing financing costs. While the fiscal buffer has narrowed due to higher interest payments, potential upward revisions in wage growth forecasts could boost tax revenue by approximately £9 billion via 'fiscal drag', partially offsetting deficit pressures. However, inflation expectations driven by energy shocks keep markets cautious.