As expected, the Federal Reserve held interest rates steady in June.

Among other things, the Fed stated "the pace of improvement in the labor market has slowed." This follows the dismal May jobs report, which was released Friday, June 3.

Achieving full employment is represents half of the Fed's dual mandate. Promoting price stability represents the other half.

What the Fed said about price stability, or inflation, had Fed-watchers a little confused. From the FOMC statement:

"Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months."

"HAHAHAHAHA," Renaissance Macro's Neil Dutta said sarcastically following the release of the statement.

On Friday, Dutta warned clients to watch for this language following the release of the University of Michigan sentiment report. According to that report, consumer expectations for inflation over the next 5 to 10 years fell to a record low of 2.3% from 2.5% a month ago. This data series started in 1979.

"If the statement maintains its existing language, describing survey measures of long-term inflation expectations as 'little changed,' it would be the rough equivalent of former Senator Phil Gramm saying the US was in a 'mental recession' back in July 2008," Dutta said on Friday. "Should the FOMC fail to change this language, they would be sending an unnecessary hawkish signal to the capital markets."

"I'm surprised FOMC described surveys of long-term inflation expectations as 'little changed' when they've actually dropped," WSJ's chief economics commentator Greg Ip tweeted.

So, what's going on here?

On one hand, it could be a hawkish message from the Fed. If the Fed believes inflation is coming, it is more likely to hike rates sooner than later. But had it acknowledged the weak survey from Friday, then it could be a sign that the Fed is fine with keeping rates lower for longer.

High Frequency Economics' Jim O'Sullivan noticed a slight tweak in the language.

"The word 'most' was added to the last sentence, presumably because of the weakening in the latest Michigan survey," O'Sullivan said of the statement.

"This is an important caveat," Dutta acknowledged. "Inserting the word 'most' reflects the fact that not all measures of inflation expectations are little changed. After all, a popular measure just fell to record lows. We suspect the minutes will reveal a bit more consternation around this point."

The lack of inflation despite ultra easy monetary policy is one of the more hotly debated subjects of this cycle. It's enabled the Fed to keep monetary policy loose as it works to stimulate the economy.