I say so for a simple reason. It's possible that the chancellor will relax fiscal policy: Philip Hammond recently said that voters are "weary" of austerity, and there are calls for him to raise public sector pay. Looser fiscal policy, however, might imply much higher rates.
The relevant measure of fiscal policy here is cyclically-adjusted net borrowing. The government currently envisages this falling from 2.9 per cent of GDP this year to 0.9 per cent in 2019-20. That's a tightening of two percentage points. Let's say - for the sake of illustration - that it halves this plan, so we get a fiscal loosening (relative to current plans) of a percentage point.
Basic economics says this would increase demand. By how much depends upon the size of the fiscal multiplier. One reasonable estimate of this would be around one. (Research suggests that the multiplier is much bigger at zero interest rates, but let's leave this aside.) This implies that we'd get 1 per cent higher GDP than currently envisaged.
If you believe inflation depends upon how much spare capacity there is in the economy, this would be inflationary, as it would reduce the output gap. To offset this, interest rates would have to rise.
By how much? Bank of England economists estimate that a percentage point rise in rates reduces output by 0.6 per cent eventually. This means that to offset the impact on demand of a one percentage point fiscal easing, rates would have to rise by 1.6 percentage points.
The precise numbers here aren't so important. The point is that if (as is likely) fiscal multipliers are large and the response of output to interest rates is small, it takes a big rise in rates to offset any fiscal loosening.
Why, then, aren't markets pricing in much bigger rate rises?
One possibility is that Mr Hammond won't loosen fiscal policy by much. He might instead raise taxes to pay for more public spending. This won't end austerity, but merely shift it onto others.
A second reason is that it now looks as if inflation isn't as sensitive to spare capacity as the Bank previously thought. The fact that wage inflation is still low despite falling unemployment tells us this. (This isn't merely a quirk of the UK economy; the same is true in the US.) If higher output isn't so inflationary, there's less need for rates to rise in response to a fiscal stimulus.
There is, though, a third reason. The size of the fiscal multiplier depends in part upon how people expect interest rates to react. If home-owning public sector workers expect higher mortgage rates, they won't spend their pay rises. Or if companies expect rates to rise a lot, they won't hire as many workers in response to higher demand as they would if they expected rates to stay low. The multiplier might be big in response to a fiscal tightening, but smaller in response to a loosening.
This raises a paradox: the more that people expect rates to rise, the less fiscal policy will stimulate the economy, and so the less need there will be for rates to rise.
It's paradoxes like these that make economic forecasting a mug's game. What we can say is that uncertainty about the future of fiscal policy should imply uncertainty about interest rates. Savers desperate for higher returns on their cash have at least a glimmer of hope now.
