Well, yes. However, in the same speech, Fed Chairman Jerome Powell reminded investors "there is no preset policy path" for the Fed.
Tucked in his speech, Powell said that rates are "just below" the so-called neutral range, the level that central bankers believe will neither accelerate nor slow economic growth - a subtle two-word shift from comments he made in October suggesting that interest rates are still "a long way" from neutral.
The downgrade is at least partly attributable to Powell's remark on October 3 that interest rates were probably a "long way" from neutral, which seemed to contradict his comment a couple of months earlier rejecting a too-rigid reliance on the neutral rate to shape policy because it could lead to costly mistakes.
U.S. Federal Reserve (Fed) said on Thursday that nearly all Fed policymakers expected another interest rate hike "likely to be warranted fairly soon".
Eventually, the FOMC determined that a December interest rate hike was appropriate.
Paul Ashworth, chief US economist at Capital Economics, said he expects two rate hikes in 2019, not the three the Fed has been projecting for next year. "We will be paying very close attention to what incoming economic and financial data are telling us". "This sounds like a more flexible approach to policy for 2019 than the impression created by the notion that the Fed has chose to lift the federal funds rate to neutral and that neutral was 3% or higher".
Minutes of the November 7-8 meeting of the Fed's rate-setting body, the Federal Open Markets Committee, show that officials expressed concerns about a variety of threats, including the impact of tariffs, a slowing global economy and tightening financial conditions amid falling stock prices.
But he cautioned that things could turn out a lot differently than the Fed expects.
The minutes said that such a change would help to convey "the Committee's flexible approach in responding to changing economic circumstances", while market supposed that this could indicate possible changes for the Fed's rate hike decisions in 2019. "As you get closer you tack a little bit more".
The benchmark rate, now at 2 to 2.25 per cent, is within a quarter of a percentage point of the bottom of the Fed's range for neutral, but is also several quarter-point rate hikes below the mid-point estimate of 3 per cent. Powell, who took over as Fed chairman in February, has said he wants to provide the public with "plain English" descriptions of what the central bank is up to.
While numerous Fed watchers saw the remarks as nothing new, many investors heard it as a signal that the central bank was far from finished raising interest rates. Bloomberg Economics anticipates three increases. "However, market pricing implies that while the Fed is likely to hike in December (about 80% priced), it will move only once in 2019".
The Fed has been trying to strike a balance between not moving too fast and risking shortening the economy's longest running expansion versus not moving too slowly and risking the economy overheating.
Neither Clarida nor Powell said definitively whether rate hikes should stop at neutral, and each stressed that level was very hard to estimate.