Speaking at an event at the Atlantic Festival in Washington, Jerome Powell’s second public appearance of the week, the Fed chair took the opportunity to underscore just why he remains so complacent about the US economy, saying “it’s a remarkably positive set of economic circumstances,” and “there’s no reason to think it can’t continue for quite some time.”

Powell also praised the recent wage increases, saying some gains are welcome and noting that “the Phillips curve is not dead, just resting.”

The surprisingly confident Powell then put on the hawkish afterburners, and repeated what he said after the last week’s FOMC announcement, saying that “interest rates are still accommodative” because “rates have just now, in real terms, moved above zero.”

And here is the reason why the dollar is surging after hours: Powell said that not only are rates far away from the neutral rate of interest – or the interest rate that neither stimulates nor holds back the economy – but the Fed may go past neutral as the tightening process continues:

“interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral – – not that they’ll be restraining the economy. We may go past neutral. But we’re a long way from neutral at this point, probably.”

Why is this important?

Because as Stifel analyst Barry Bannister – who correctly predicted the February correction – wrote three weeks ago, contrary to Powell’s assessment, just two more rate hikes would put the central bank above the neutral rate. The Fed’s long-term projection of its policy rate has risen from 2.8% at the end of 2017 to 2.9% in June. The September rate hike followed Bannister’s note, so as of this moment just one more hike would be sufficient to push the fed funds rate beyond neutral.

What Bannister said next was ominous:

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