Image: Policy Exchange Image: Policy Exchange, Mark Carney, Bank of England governor

UK interest rates are at a record low – no news there, it has been like that for around ten years. Until recently, UK interest rates were widely expected to go up this year, or early next, well that is no surprise, they had to go up eventually. But maybe not, the latest news would suggest they are set to stay low for much longer yet.

Not everyone likes ultra-low interest rates. It is bad news for people who have savings, bad news for people who are retired and live off interest. Others say there is a deeper problem, ultra-low interest rates have created asset bubbles, blown up house prices, for example. It will end in tears they warn, when rates do rise, expect bad things to happen.

But the point about low-interest rates is they are meant to stimulate the economy, get spending up, create more demand in the economy, and as a side-effect, create inflation.

Well, that hasn’t happened. In the UK, inflation did rise a tad this year, but the latest data has it at 2.6 per cent, hardly the stuff of runaway inflation. And the main reason why it is as high as that is down to the falls in sterling seen last year.

In the US and euro area, inflation is about as threatening as a pensive hamster. In the US, headline inflation was 1.7 per cent in July, in the euro area it was even lower.

But never fear, those who hate low-interest rates were told, rates will go up soon, we will see a return to normal.

And as if it was trying to prove these people right, the US Federal Reserve began to increase interest rates.

But all of sudden, things look different.

In the US, the FED has started making much more cautious noises about interest rates. In fact, this week, the Vice Chair at the FED, Stanley Fisher, resigned. In financial circles, it has created quite the uproar – with the general feeling that when her tenure ends as Chair, Janet Yellen will not be asked to stay on. So, who will President Trump choose to replace her? The typical central bankers favoured by Republicans tend to have a more hawkish approach to interest rates – more inclined to increase them. But President Trump dare not risk a slowdown in the US economy caused by higher rates. No, the big effect of Mr Fisher’s resignation is that the President may use this to appoint an individual who is more enthusiastic about cutting back on regulation. Interest rates are not likely to be affected.

But in the euro area, the economy is doing nicely – on course for the strongest growth since 2007, yet inflation remains in the doldrums.

However, in the latest meeting of the European Central Bank's interest rate setting committee, which finished yesterday, the President, Mario Draghi, went big on words such as ‘patient’, and how things will take time.

So, no rush there.

As for the UK.

In the early summer, no less than three of the eight members of the Bank of England’s rate setting committee, the MPC, voted for a hike in interest rates. But since then, one of the three has left, the other two are sounding increasingly like lone voices. In the last MPC meeting, they were the only two voting for higher rates.

But yesterday, something interesting did happen. The yield on UK ten-year bonds fell to 0.96 per cent, meaning the government can borrow for ten years and pay less than one per cent interest. That is the lowest level since June, but then back in June, we had things like a general election to worry about. You need to go back a year to find the last time bond yields were consistently this low.

The markets seem to be telling us that UK rates are going to stay on hold for a good while, yet.