This will-they-won’t-they rate-rise saga has dragged on long enough

When news broke last Thursday evening that the US Federal Reserve had decided to keep interest rates on hold, I happened to be surrounded by serious economists representing a range of viewpoints and nationalities. None seemed surprised by the decision, though the media had declared it to be on a knife edge. But I did sense disappointment, not so much because the assembled sages thought technical data pointed to a rise but because the whole will-they-won’t-they saga of the first US rate rise since December 2008 (or March 2009 in the case of UK rates set by the Monetary Policy Committee) now feels as if it has dragged on far too long.

Despite some off-piste remarks by Bank of England economist Andy Haldane to the effect that rates might actually have to be cut again to protect the UK’s recovery if other parts of the world go haywire, the general expectation (including, we gather, in the governor’s parlour) is that rates will start rising, in small increments, by early next year at the latest but will remain low by historic standards even in this new phase, reaching no more than 2 per cent by 2018.