You might have heard that the FOMC removed the word “patient” from its directive yesterday, in that it would no longer be “patient” in waiting to remove monetary policy accommodation.

Lots of people were betting—have been betting for weeks—that this would be the meeting where Janet Yellen would lay out the path for a rate hike in June. The dollar has gone straight up against just about every G10 currency.

They did remove “patient.” But in the end, the Fed folded—as they always do.

Writing in other forums, I have been making the case for a long time that the Fed has no intention of hiking rates, possibly ever. They want to want to hike rates, but they don’t really want to hike rates.

Possibly, they understand that raising the fed funds rate a tiny bit after six years of it being essentially zero would throw the financial markets into a tailspin. So they keep waiting for that perfect economy and look for excuses along the way not to hike.

This time: not enough inflation.

What the FOMC did was to replace the word “patient” with the words “reasonably confident.” I quote, from the directive:

It will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. (emphasis mine)

It is worth pointing out that inflation, as expressed by the Fed’s favorite measure, Core PCE, shows no signs of approaching two percent.

I had said before that the Fed was not going to hike with inflation at 1.3%, because there is no reason to hike when inflation is 1.3%—not when the chairman graduated from Brown in ‘67 and Berkeley in ‘71 and doesn’t really care about inflation. Not when a number of Federal Reserve officials have expressed their willingness to let the economy run hot to ensure that we won’t experience deflation.

If you don’t know the Fed, you might look at this and say, “Gee, they got rid of ‘patient,’ so that means they’re going to hike in June, right?”

No. They’re not going to hike in June. There will be no rate hike in June… or anytime soon.

The directive explicitly states that there will be no rate hike in April. Remember: the Fed will not hike because it wants to. It will only hike because it has to. And inflation has to go a lot higher—a lot higher—before it has to.

In the short term, this means a reversal of recent trends. We will temporarily experience a weaker dollar, stronger metals, higher US stocks, and stronger emerging markets. The bond market is bid again (much to my consternation), with two-year notes rallying over 15 basis points yesterday as Fed hikes start getting priced out of the curve.

Pretty much anyone who has bet on rate hikes in fed funds or Eurodollar futures in the last five years has lost. And they will continue to lose.

I can see a scenario where the unemployment rate is actually in the four handle and the Fed is still not hiking rates.

I expect that sometime between now and the April meeting, various Fed speakers will do their best to weasel out of any remaining expectations that there will be a June rate hike. They will walk that back. Then they will walk back July, and then September, and before you know it, whoops, it’s an election year. You can’t hike in an election year.

First rate hike 2017? Sounds about right.

I try to be cynical, but it is hard to keep up.

Jared Dillian