The Fed's worst fear isn't the economy, it's being wrong.
The Federal Reserve power struggle started when Greenspan became a celebrity. It ramped up when politicians started taking shots at the Fed during the crisis and through QE. The Audit The Fed crowd is the latest example.
It's left the Fed scared of being wrong. It's scared of criticism. Scared of losing its power.
Yellen is terrified of hiking rates too soon and then having to cut them again but really, what's so bad about backtracking?
Sure, you lose a bit of economic growth. But you gain some valuable information. You find out that the underlying economy is much weaker and use that to signal lower rates for longer, or take other measures. You can easily regain what was lost.
The same fear is causing the Fed to over-communicate. The Fed is terrified of being blamed for a 'taper tantrum'. What's wrong with letting markets be markets? It's healthier for markets to have some uncertainty in rate predictions rather than expecting to be spoon-fed forever.
