Many have interpreted the Federal Reserve’s recent decision to raise the discount rate and begin unwinding its various quantitative easing programs as a sign that the US economy has returned to health. In reality, these moves are more about the financial system normalizing than a real turn in the domestic economy.

The discount rate is what banks pay for short-term loans from the Federal Reserve in its role as a lender of last resort. When the central bank slashed rates and extended loan terms early in the downturn, it attempted to remove the stigma typically associated with having to borrow from the discount window. Tightening the terms of these loans indicates that the banks the Fed was most interested in saving are reasonably well capitalized after the unprecedented bailout.

By unwinding these programs, the Fed is reloading its first-aid kit in case the European debt crisis turns from a bad case of the flu into full-blown pneumonia for the global economy.

Thankfully, Europeans likely will resolve their problems among themselves. The region’s governments appear disinclined to ask the International Monetary Fund for assistance, and the crisis is an important test of the EU’s viability. Cobbling together an assistance package for Greece would both contain the crisis and bolster the organization’s credibility.

Rising defaults on commercial real estate loans also present a significant challenge to the financial system and will pose a danger for some time to come. More than $1 trillion of troubled commercial real estate debt will come due over the next three years. That’s a huge potential problem; the Federal Reserve will need all of its available tools in the event defaults spike higher.

Chairman Bernanke acknowledged as much in recent testimony before Congress, conceding that bank lending still faces an uphill climb before it returns to normalcy and acknowledging that the Fed likely will keep interest rates low for the foreseeable future. And given Bernanke’s familiarity with the Great Depression, the current push for deficit reduction is probably raising uncomfortable parallels with similar steps taken by the Hoover Administration–moves that are widely believed to have slowed the recovery.

Although the US economic situation continues to improve, we’re not out of the woods yet–plenty of challenges are on the horizon. Don’t expect any serious discussion of rate increases until these threats are resolved.