The core theme of the announcement on interest-rate forward guidance by Bank of England governor Mark Carney was heavily trailed and largely expected: namely that ultra-low interest rates will continue for some time, with a US-style link to unemployment rates as the threshold for contemplating rate rises.
Confidence in the recovery is growing and should gain a further boost from the guidance that rates could be kept on hold possibly until the end of 2016.
But the real focus for markets has been the various caveats that could override the guidance.
These are based on forecast inflation for the next 12 to 18 months being 0.5% or more ahead of the Bank of England's official 2% target; medium term inflation expectations being no longer sufficiently anchored; or the policy threatening financial stability. This has left markets somewhat underwhelmed, after expectations in the new governor had been running so high.
While the parallels with US policy have been widely noted, there is an important difference.
The US recovery has been underpinned by four strands: quantitative easing, conventional monetary easing (low interest rates), fiscal forbearance and a recapitalisation of the banking sector.
The UK has only really done the first two, so it remains to be seen whether that proves sufficient. Despite the flurry of more encouraging economic data, this could yet prove to be a blip.
Clearly uncertainties remain, notwithstanding the central purpose of forward guidance.
As we approach announcements on employment and inflation data, this could actually lead to renewed volatility, especially in parts of the UK equity market, such as the more domestically-skewed mid-cap space where valuations suggest a lot of optimism is priced in.
Ultimately there are bigger factors that will drive equity markets, which in the near term include quantifying the impact of slowing Chinese growth on the global economy and future moves by the US Federal Reserve.
Notwithstanding this, the prospect of low rates continuing for some time yet - probably at least until the Funding for Lending scheme ends in 2015 - should bring cheers to borrowers and give a further leg to the rally in property prices.
That will undoubtedly make the public feel good, providing a fillip to the recovery, but let's not forget that real earnings are still below pre-crisis levels and the gap between average earnings and average property prices is already stretched by historic standards. This could be problematic when rates ultimately rise, which they will.
The continuation of ultra-low interest rates also means the pain of the last four and a half years for cash savers is set to continue.
Low interest rates coupled with persistently above-target inflation have conspired to erode the real value of cash savings.
Yet despite this, the public have continued to pour money into cash ISAs. Some 14.6 million UK adults invested in ISAs last year but 80% of those accounts, representing more than £40 billion of assets, went into cash.
Now of course it makes sense to hold some cash for short-term needs and emergencies but as a long-term place to park your wealth, it just doesn't make sense.
With low rates potentially set to continue for years yet, some of this cash will need to get flushed out into riskier assets that offer the potential for inflation-beating returns, especially those offering a yield.
This means equities, higher yielding bonds, and commercial property. But savers should make the shift progressively, as markets could be volatile ahead.
Jason Hollands is managing director of financial advisers BestInvest
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article