Federal Reserve Chair Jerome Powell made a hawkish pivot on Friday that few have picked up on, according to one close watcher of the central bank.

Tim Duy, the chief U.S. economist for SGH Macro Advisors, made the comments as Fed funds futures now are increasingly pointing to rate cuts from the U.S. central bank.

There’s now a 60% chance of a Fed rate cut in May, according to the CME’s Fedwatch tool, which last week was just a 14% probability. Expectations are that the Fed will cut rates down to 3% by the end of the year.

The 2-year Treasury yield, the bond most sensitive to monetary policy shifts, plunged 15 basis points to 3.51%.

“We anticipated Powell would lean hawkish Friday, but he went a step further even as equities were crashing, and market participants may have missed a key insight, scary as it might be,” says Duy.

Powell used new language to describe inflation expectations. On Friday, he pointed out that longer-term inflation expectations were beginning to be a concern, and not just those over a one-year time horizon.

More crucially, his forward-looking guidance changed. Powell got rid of two sentences used to keep rate hikes off the table: “If the economy remains strong but inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly,” is what the central banker said on March 7, language he didn’t repeat.

Duy says that change is important. “To be sure, there is no explicit talk of hikes now, but hikes are no longer explicitly excluded. Powell knew markets were in free fall when he made this change. That’s not being tone-deaf. That’s being deliberate,” says Duy.

Another point is that Powell directed market participants to recognize the implications when both elements of the Fed’s mandate — inflation and jobs — are under threat from different directions. “The higher and more persistent spot inflation and inflation forecasts, the higher and more persistent spot unemployment and unemployment forecasts need to be to hold rates steady,” says Duy.

Duy made his own calculations of the trade-off, using something called the Taylor Rule, which is a rules-based way of setting interest-rate policy.

“Now, if you are penciling in 0.4s, 0.5s, or maybe in some cases 0.6s for core-PCE in the coming months, think about how quickly and disastrously the labor market outlook needs to turn to support a rate cut,” says Duy, referring to monthly changes in the core personal consumption expenditure price index. “After all, 0.5 is more than 6% annualized.”