The Fed’s sense of caution is something to watch. It’s largely what’s keeping short-term interest rates ultra-low until 2014 – a policy that’s irked savers and investors who’ve seen almost no return on their cash. Republicans, in particular, aren’t thrilled about it either. They say cheap money could eventually stoke inflation and make the fragile economy worse off.

The Fed justifies this by citing the plethora of risks that could derail the recovery. For one, higher oil prices that threaten to crimp consumer spending. There’s also a troubled housing market that has continued to weigh down household wealth, a high unemployment rate, and Europe’s ongoing debt crisis.

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Not to minimize these risks, but it’s worth noting that they were lingering back when the central bank seemed more optimistic not so long ago. So the Fed’s caution may signal the central bank’s focus on strengthening its credibility.

After all, Fed Chairman Ben Bernanke got it embarrassingly wrong before. It was around this time last year when the unemployment rate fell to its lowest level in two years. In April 2011, the Fed projected the economy would grow between 3.1% and 3.3% in 2011 and between 3.5% and 4.2% in 2012 – a forecast that was slightly more optimistic than private forecasters. According to Blue Chip Economics, which surveys forecasters monthly, the firm on average projected growth of 2.9% in 2011 and 3.1% in 2012.

“It was the best news we had received in a long time,” says Don Dutkowsky, economics professor at Syracuse University. “It was almost natural to be optimistic.”

But it wasn’t just the Fed who got too bullish. By summer of 2011, Wall Street firms were revising its GDP forecasts lower as the ripple effects of Japan’s tsunami and higher gas prices weighed on America’s economy.

“We’ve seen a few false dawns with this recovery,” said Josh Feinman, chief economist for Deutsche Bank’s (DB) DB Advisors, the firm’s institutional asset management business. He recalls the bank lowering its forecasts mid year last year.

In its latest forecast, the Fed in January lowered its expectations for GDP growth to a rate of 2.2% to 2.7% for 2012. This falls within the range of most private forecasters who have also taken caution after being overly bullish last year. However, it’s still lower than some notables who’ve been more willing to embrace the recent strong economic data.

Moody’s Analytics expects the economy to grow 3%. And as CNNmoney’s Paul La Monica pointed out earlier this year, Caterpillar (CAT), the world’s largest construction and mining-equipment maker, also expects the economy to grow at a rate of at least 3%.

Wall Street and the media might have hinted that the Fed may be slowly coming around to the goods news, but the central bank hasn’t fundamentally changed its stance. For now, interest rates will be close to zero for the next two years. And officials haven’t announced any immediate plans to launch another controversial round of bond purchases to help stimulate the markets.

This time, the economy will have to improve considerably more before it fools the Fed again.