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Unfortunately, the current answer is that improved privacy is suggested quite often, and valve hasn't implemented it as of yet. This means that it is either in development, or they don't care to do it.
We really have no way of knowing, despite it being such a requested feature.
if you want privacy, stay offline and don't use stuff which is meant to be for people connecting and sharing..
Being online has nothing to do with sharing your life... for the majority of the time the internet has been around, the people using it have been completely anonymous.. only recently, with the development of social platforms, has personal information become more shared. Steam is primarily a gaming platform, not a social platform - those social features are secondary, but it would be good to have some more control over it.
Even though you are online, are there not many many aspects of your personal private life that you do not share at all ? in a similar way, we want control over the aspects of our profiles that we can choose to share or not.
All that is being requested is more control than full private, full friends public or full public.