The U.S. Federal Reserve marked the beginning of its new policy of increased transparency on Wednesday with a surprise for investors. In previous communiques, the Fed has stated its intention to keep its benchmark fed funds rates low through mid-2013 in order to combat the weakness in economic growth. Today, the Fed took this a step further to assure investors that it doesn't intend to hike rates until late 2014. If the Fed follows through on this pledge, its zero interest rate policy will have been in effect for nearly six years once it finally begins to raise rates again in 2014. Notably, Japan's period of zero interest rates lasted only five years, from 2001 through 2006.
What does this mean for investors? The short answer: more of the same. Safe, shorter-term investments have been paying next to nothing for years, and will likely to continue to for another three years. While helpful to borrowers, today's news indicates that savers will be punished with low rates for a long time to come.