Oct. 8 (Bloomberg) -- For bingers who claim that they’re not ready to leave the party yet, central bankers are jiving hard to convince us that they know where the exits are. My bet is that they’ll bail sooner than financial markets think.

But hey, what a swell party this is! Official interest rates at or near record lows almost everywhere; bond yields signaling a benign inflation outlook; equity markets roaring ahead; emerging markets on fire; and commodity prices pointing to a V-shaped recovery that seemed impossible as the year started. Cheers!

The better the shindig, the harder it is to know when to leave. Depart too soon, and you might miss out on a whole heap of fun. Dance until dawn is peeping through the curtains, and the hangover could be crippling. Central bankers, though, are starting to shuffle nearer the door, signaling to each other that it might be time to retire gracefully before tables get danced on, clothing discarded, and reputations trashed.

“We will need to remove our very accommodative policy sooner rather than later,” Federal Reserve Bank of Kansas City President Thomas Hoenig said in a speech this week. Fed Governor Kevin Warsh said last month the U.S. central bank may need to raise interest rates “before it is obvious that it is necessary, possibly with greater force than is customary.”

Learning Curve

The last time central bankers got financial markets inebriated on free money, the aftershock was akin to the next- day trauma suffered by a teenager who thought imbibing a stolen bottle of cherry brandy would be a fun way to spend an evening. The Fed must have learned its lesson about keeping borrowing costs too low for too long. Mustn’t it?

Australia has already skipped the revels. This week, it became the first among the Group of 20 nations to drive up borrowing costs since the collapse of Lehman Brothers Holdings Inc. in September 2008 exacerbated the crisis. The central bank announced a surprise quarter-point boost in its overnight cash- rate target to 3.25 percent.

Significantly, the Reserve Bank of Australia did so even while the country’s unemployment rate is stuck at a six-year high of 5.8 percent -- a lesson for anyone who thinks joblessness will guarantee the status quo. Other central banks might be similarly inclined.

“I don’t think that is a showstopper if the unemployment rate hasn’t starting falling yet,” Fed Bank of Richmond President Jeffrey Lacker said this month. Even though the Fed hasn’t previously boosted borrowing costs while workers were still losing jobs, “there is a first time for everything.”

Rate Futures

The futures market is convinced that interest rates are going nowhere fast. The three-month dollar contract for settlement in December 2010 shows a rate of about 1.6 percent; while that’s way more than the current 0.3 percent cost of borrowing the U.S. currency for 90 days, the futures rate has been ticking down on almost a daily basis for two months, and is down almost a full point since the first week of August.

There’s a similar picture in other markets. The December 2010 euro contract, for example, has tumbled to about 1.8 percent from 2.6 percent three months ago; the British pound version is down to 2.15 percent from 3.47 percent on June 11. Traders are scaling back their rate expectations even as the equity market suggests the global economy is mending.

New Normal

That could be a mistake. Central banks will find it hard to keep beating up on investment bankers for the sins of the financial industry without policy makers also showing that they have examined their consciences and found room for remorse. A swifter than predicted return to a more normal monetary-policy environment would be one way of proving that the lessons of the bubble years have been learned.

The U.S. has already scaled back some of its market support mechanisms. Last month, the Fed said it would reduce the Term Securities Lending Facility to $50 billion from $75 billion, and the Term Auction Facility to $50 billion from its $900 billion peak. Banks have repaid more than $70 billion of the cash extended through the $700 billion Troubled Asset Relief Program.

With liquidity seeming to improve, the temptation for central bankers to water down the punchbowl, if not remove it completely, will increase. The one financial bet that does seem misguided for the next year or so is to anticipate that there will be no change in policies, no removal of stimulus, and a smooth glide back to the good old days.

So, don’t be fooled by the clinking glasses in the stock market and the soothing beats in bonds. The music could come to a sudden halt if the central banks, who have been the life and soul of the recovery party, all rush for the exits at once.

(Mark Gilbert is the London bureau chief and a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net

Last Updated: October 7, 2009 18:01 EDT