NEW YORK (CNN/Money) - Lately when I think about the Fed, it's all about D's: Dissent, Deflation, and now, perhaps, Denial.

Federal Reserve Vice Chairman Roger Ferguson gave a speech Wednesday night focusing on all the things the Fed can NOT do, leaving the distinct impression he's distancing (yes, another D-word) himself and the Fed from the problems he seems to believe policy can't fix.

Here's what the Fed can't do with interest rates, according to Ferguson: It can't help individual industries or regions. It can't smooth big swings in the stock market. And the Fed has only limited ability to offset shifts in "aggregate demand" (that's consumer and business spending), knowing neither how long it takes for rate cuts to impact the economy nor what level is required.

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The best the Fed can do, Ferguson said, is to "strive to minimize macroeconomic risks," like the risk of rising inflation or the risk of deflation (he didn't actually use that D-word -- he referred only to a time when "the overall price level is declining.")

OK, so the Fed is not all-powerful. But the Fed's job is to do whatever it can to make sure the economy doesn't start deflating, because if there's One Big Worry right now, that's it.

Let me say that Roger Ferguson comes across as an honest, sincere, extremely bright man (not to mention and a good guy). He came to the Fed in 1997 from a career in law and banking -- triple degrees from Harvard -- and became Greenspan's second in 1999.

His views seem usually to be in step with the Fed chairman and the majority on the board. That would put him squarely in opposition to the two dissenters who voted against holding rates steady on at the Fed meeting on Sept. 24. The dissenters voted to cut rates now!, while the rest indicated they think the Fed has done enough to keep the economy moving ahead.

Just six days later Bob McTeer, one of the dissenters and president of the Dallas Federal Reserve Bank, said why he's so worried. You can't know when "welcome disinflation" (when the rate of inflation grows ever lower) turns into "unwelcome deflation" (when prices in general are falling).

Deflation is bad if it's economywide because it means companies have to cut prices to remain competitive, which cuts profits and leads to cost-cutting (including layoffs).

Most economists agree that we're not quite there yet since services prices are rising healthily even as goods prices fall. But there are a lot of econo-folks who believe, like McTeer, that if the economy should slow more, then deflation is the risk we face.

Folks like Steve Forbes, publisher and CEO of Forbes magazine and onetime presidential candidate, who was on CNNfn on Thursday. I asked him what he thought of Ferguson's speech, and what he thought of the Fed's majority view that it has done enough for now.

The Fed is in danger of making the movie "Clueless II," Forbes said. He believes there's been a credit crunch under way for small and medium-sized businesses, and that the Fed needs to be more aggressive or run the risk of deflation.

"I think that's why the Federal Reserve has to say explicitly it will provide sufficient liquidity to get this economy moving again," Forbes said. "The Fed has been behind the curve."

So where does that leave us? If stocks (which the Fed says it takes into account but does not target ) continue to rally, it's likely all these D-words will disappear. If they don't, then all the worries about a loss of consumer and business confidence will remain with us, and another D-word may join the list: Depressed.

Kathleen Hays co-anchors Money & Markets, airing Monday to Friday on CNNfn, and appears throughout the day reporting on the economy and how it affects financial markets. As part of CNN's Business News team, she is also a regular contributor to Lou Dobbs Moneyline.