He told an audience in NY on Wednesday, "Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy".
Stocks and interest-rate futures jumped, even while economists wrestled to interpret whether Powell meant to send a message or was simply misunderstood.
"Westpac is forecasting rates will rise in December, and this will be followed by 3 further rate hikes in 2019.
Bloomberg Economics does not take it as a signal of the Fed dialing back on the number of expected rate hikes, but rather as an intent to be more flexible in setting policy as they approach the neutral rate". "This sounds like a more flexible approach to policy for 2019 than the impression created by the notion that the Fed has made a decision to lift the federal funds rate to neutral and that neutral was 3% or higher".
Market participants interpreted that as a dovish signal for future rate hikes, compared with Powell's previous remarks in early October that rates were "a long way" from neutral, a level neither stimulative nor restrictive to the economy. Futures showed the amount of tightening priced in for 2019 slipped to 25 basis points - equivalent to just a single rate hike.
Minutes of the USA central bank's November 7-8 meeting showed "almost all participants" agreed that another rate hike would likely be necessary "fairly soon".
"His description highlights the significant uncertainty around estimates of neutral, a theme he mentioned at his speech at Jackson Hole in August", Jan Hatzius, chief United States economist for Goldman Sachs, wrote in a note to clients Wednesday.
Stock markets began a broad descent toward a correction - a decline from the most recent peak of at least 10 percent - in early October, just after Powell had sounded a quite confident tone on the economy.
"What do you do?" said Powell in NY.
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. "And I'm not blaming anybody, but I'm just telling you I think that the Fed is way off-base with what they're doing", he was quoted as saying in the report.
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. "There is a great deal to like about this outlook, " he said in a speech to the Economic Club of NY. The president has blamed the Fed for the steep two-month fall in the stock market and the possibility that his efforts to boost growth with a major tax cut will be thwarted by rising interest rates.
"Over the past year, firms with high leverage and interest burdens have been increasing their debt loads the most", Mr. Powell said.
The Fed raised its benchmark rate in March, June and in September, with the last increase putting it in a range of 2 per cent to 2.25 per cent.
With a December increase broadly expected, that meeting may stand out more for the fresh economic projections that policymakers will issue, providing a clearer view of how their perceptions of the economy and the proper path for rates may have changed in recent weeks.