For all the talk that central banks have taken over financial markets, the paralysis gripping the Federal Reserve over upsetting bond traders sure makes it seem as if it's the other way around.

Time and again, Janet Yellen and other Fed officials have tried to jawbone investors into believing they were finally ready to raise interest rates. Yet time and again, whether it was because of Brexit, a slowing Chinese economy, or just lackluster growth at home, they lost their nerve.

The consequences have been significant. Not only have doubts about the Fed's resolve left traders convinced there's little more than a 50-50 chance rates will rise at all in 2016 (policy makers began the year predicting four hikes). They've also fueled a sense of complacency that has everyone from Jeffrey Gundlach to Bill Gross warning bonds are overvalued. But perhaps most important of all is that the perceived loss of credibility has left the Fed with no good choices. Either raise rates now and risk blindsiding investors, or hold off longer and reinforce the view it's at the mercy of the markets.