The Fed is still pessimistic about the economy. But it might not be pessimistic enough.

The Federal Reserve announced Wednesday that it would once again delay hiking interest rates. As both the Fed and observers likes to say, America's central bank is "data dependent" and the evidence to hold rates was overwhelming.

As Fed Chair Janet Yellen acknowledged Wednesday, both the official unemployment rate and other measures of unemployment have basically stopped falling since the start of the year. Inflation expectations are also weaker now than they were in December, when the Fed first hiked interest rates. And actual inflation ran well below the Fed's 2 percent target all year, and has arguably fallen recently.

So the good news is that the Fed looked at this data and made the safe decision, deciding to hold interest rates in an effort to keep boosting the economy. The bad news is that the economy might be in a lot more trouble than many Fed officials want to acknowledge — and might even necessitate lowering rates, much less raising them.

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Let's start with the Phillips Curve, one of the Fed's favorite theoretical models. It says that when unemployment is as low as it is now, inflation should start rising. That's important because a lot of Fed officials also hew to the (highly questionable) theoretical belief that once the inflation rate accelerates, it's very hard to stop. As a result, some of the Fed's voting policymakers are super skittish about the new normal of super low rates, and are itching to get back to a world that better matches their experience.

But Lael Brainard, a member of the Fed's Board of Governors, noted in a recent speech that, as far as what the data from the economy shows us, the Phillips Curve appears to have broken down. Inflation simply isn't responding in the predicted fashion to the unemployment rate. There are a lot of possible reasons for this. But something's clearly amiss.

You can find a similar, if even more distressing story, in the "natural rate of interest." This economic concept represents the ideal interest rate, one that helps the economy employ everyone it possibly can without inflation rising. Because it's purely theoretical, no one knows exactly what the rate is at any given time, but there are models that can go back and estimate its path historically. And as far as we can tell, it's been falling for decades. In fact, it looks like it's been at or below zero since the Great Recession.

This is, to put it mildly, a problem. Central banks can and are experimenting with pushing interest rates below zero, but they take you to a weird place where the economy might stop responding to interest rates the way it normally does. So the Fed hasn't tried them yet. But that refusal to consider lowering rates below zero might actually be dragging down the economy and holding back recovery if estimates about the natural rate of interest are right.

And then there's the most serious problem: recession.

Historically, we're already due for another one, but what will the Federal Reserve do if it actually occurs? The central bank has typically needed to cut interest rates by roughly 4 percentage points to boost the economy out of a slump. But if the natural rate of interest is already below zero and the Fed won't or doesn't know how to effectively go below that level, how will it cut interest rates by 4 points? This is why critics like Larry Summers argue that the Fed is not nearly panicked enough that its normal toolkit for fighting recessions has disappeared, and no obvious alternative has so far emerged.

The Fed is still at least a little pessimistic about the economy, as Wednesday's decision shows. But it may not be nearly pessimistic enough.