REUTERS/Jonathan Ernst

Ever since the recovery began, there have been people looking for an excuse, any excuse, to raise rates. Most of them, like Harvard professor Martin Feldstein, have been making the same, incorrect predictions for years: that inflation is just around the corner (or is it a bubble?), and we need to tighten policy to head it off.

Well, they're not going to like Fed Chair Janet Yellen.

Now, as expected, the Federal Reserve cut its bond-buying from $45 billion to $35 billion a month at its June meeting. And it reiterated that even after it's out of the asset purchase business completely, which it should be by the end of the year, it could still be a while before it raises rates above zero. But even though this mostly stuck to the same old script — the Fed statement barely changed from April — what Yellen said about it tells us more about their thinking. Here are the three big takeaways.

1. The Fed is focused on the long-term and shadow unemployed. The biggest question about the economy today is whether the millions of people on the margins of the work force will rejoin it. Alan Krueger, former chair of the President's Council of Economic Advisers has found that the long-term unemployed rarely do — which would mean there isn't as much slack in the economy as we think, and inflation will pick up. But Fed researchers dispute this, and their own work shows that the short-term and long-term unemployed exert equal downward pressure on wages.

It's a debate that, the Wall Street Journal reports, even carried over to a wedding that Yellen and Krueger both attended — only to be broken up by dance music. But, at the Fed at least, she's won it. Though Yellen admitted that "it's conceivable there is some permanent damage" to the long-term unemployed, she was still optimistic that a faster recovery would pull more people back into the labor force. It's an empirically supported hope. As I've shown before, the less unemployment there is, the more people outside the labor force find work. In other words, a strong job market sucks in the "shadow unemployed" of discouraged workers.

2. The Fed still isn't worried about inflation. In May, core CPI inflation, which strips out volatile food and energy prices, hit 2 percent. It was the biggest monthly increase in almost three years, and, even though the Fed targets the lower PCE index, it raised questions about whether the Fed would hike rates sooner than expected.

The short answer is no. The Fed's policy statement focuses on the risks of too low, not too high, inflation, as did Yellen. She dismissed the monthly data as "noisy," and said she didn't see "any tradeoff whatsoever" between inflation and unemployment since they "both call for the same policy, namely a highly accommodative monetary policy." In other words, the Fed is keeping rates low to make sure, in part, that inflation doesn't stay too low, like it has been for the past year.

3. And it's not concerned about a bubble, either. Markets are quiet, and Jon Hilsenrath of the Wall Street Journal reports that some at the Fed are worried they might be too quiet. The problem, as economist Hyman Minsky famously put it, is that stability can be destabilizing: people take on bigger risks and bigger debts when times are good, because they can't imagine that they'll be bad. This means that even a small shock can turn into a big one, because of forced selling from margin calls.

But even though market volatility is at post-crisis lows, bubbly behavior isn't back at pre-crisis highs. The Federal Reserve, Yellen said, is trying to measure market froth by monitoring underwriting standards and investor appetite for risky debt. Though there are some worrying signs — subprime bonds, anyone? — it isn't 2005 all over again. "Monetary policy right now," Yellen explained, "is not being shaped in an important way by financial stability concerns."


Now, this doesn't mean that the Fed has stopped worrying about inflation or bubbles. It's the job description of a central banker to always lose sleep over these things. It just means that the Fed isn't letting these worries get in the way of the recovery without evidence that there's actually something to be worried about.

Imagine that.