It feels like the price of borrowing has been superglued to half a percentage point. And in fairness, it can be no other way, because the economy is running on fumes.
There’s every chance of a double dip, as many of the high street’s retailers know all too well.
But in economics, as in life, there’s no such thing as a free lunch. Cheap money has a cost, and the cost is inflation.
But even worse than cheap money, from an inflation perspective, is free money, and that’s exactly what is being pumped into the system right now in the form of quantitative easing.
My concern is whether QE could trigger a protracted period of high inflation, with predictably negative effects on the UK’s economy and property market.
The thing with QE, of course, is that nobody really knows what’s going to happen. We’re essentially printing money blindly and hoping for the best. But you do get the feeling that it all might just come back to bite us.
And don’t think that policymakers couldn’t possibly fail to see a danger like this coming.
Nobody thought for a minute that all the excessive borrowing of the nineties and early noughties would ever end in the way it did. And here we are. So there’s every chance they’ll fail to see the full effects of QE.
As for the property market, its single biggest support in recent years has been low interest rates, but over time it may well be that they, coupled with QE, prove to be its undoing, as inflation embeds above target.
To combat inflation, rates would then have to be kept high for a protracted period of time, with subsequent downward pressure on the property market and economy.
This is all theory, of course, as ultimately nobody knows. But my feeling is we’re looking at a lot more pain before the economy finally gets back on track.