(James Saft is a Reuters columnist. The opinions expressed are his own)
By James Saft
(Reuters) – Sometimes it is better not to over-think things.
The Fed’s non-taper is one of those times.
The U.S. central bank is encouraging you as an investor to sit back, enjoy the warm water and take on some risk.
For now, maybe not for long, but for now, that is probably what you should do.
The Federal Reserve’s decision not to begin to cut back on its purchases of bonds caught investors unawares on Wednesday. Economists and Fed watchers had been in virtually unanimous agreement that the bank would shave back, or taper, bond purchases, with most of the debate centered on how they might sugar the pill by providing guidance indicating that interest rates might stay low for longer than anticipated.
Instead the Fed put off the taper and left investors remarkably unsure about why or when they might begin.
“The Fed’s actions are consistent with the idea of being ‘credibly irresponsible’. That is an intention to support demand via, among other channels, an increased perception of higher risk and greater inflation risk,” interest rate strategists at Societe Generale led by Vincent Chaigneau wrote in a note to clients.
“The FOMC is giving us an invitation to take on risk. There is no reason for investors not to accept the gift.”