Finally, and perhaps most importantly for the well-being of both the U.S. and global economies, the biggest takeaway from Yellen’s important speech could go beyond the specific issues she covered. Her remarks and their context could be taken to suggest that, for reasons beyond its control, the Fed is increasingly held hostage by three forces that could threaten its own credibility and political autonomy:
• Politicians who repeatedly fail to take advantage of the time the Fed buys for them, withholding a much-needed comprehensive policy response to the cyclical and structural challenges to the U.S. economy, as well as limiting America's ability to have a leadership role in global policy coordination.
• An international economy that is losing its growth traction, however sluggish, as structural and cyclical headwinds converge and as the political context becomes more complicated both in Europe and in some parts of the emerging world.
• Financial markets that feel empowered and enabled to force the Fed's hand -- regardless of the underlying economic and corporate fundamentals.
Mohamed El-Erian is chief economic advisor at Allianz SE.