A top Federal Reserve official acknowledged the shift in economic conditions that took place during 2018, warranting the termination of a fixed plan to "gradually" raise interest rates in favor of an ad-hoc approach.

The speech by Federal Reserve Bank of New York President John Williams, a key economic adviser to Fed Chairman Jerome Powell, comes as investors and traders grow increasingly convinced that the central bank will soon pause its three-year long rate-hiking campaign.

The economy is no longer benefiting from the early-2018 stimulants that warranted the continuation of the Fed's gradual rate increases, he said: tax cuts, low interest rates and buoyant financial markets.

Williams repeated the bywords used by Powell -- "data dependence" -- to reflect the idea that officials have abandoned a preset plan to gradually raise rates and will evaluate borrowing costs on a meeting-by-meeting basis following an up-to-the-minute evaluation of the state of the economy.

"The tailwinds have lost their gust, interest rates are closer to normal levels, and inflation is tame," Williams said. "The approach we need is one of prudence, patience, and good judgment. The motto of 'data dependence' is more relevant than ever."

The Standard & Poor's 500 Index, which fell about 6% last year, the most in a decade, has rallied this year, at least partly on speculation that the Fed will ease the pace of rate increases. Lower borrowing costs encourage businesses and consumers to invest and make purchases, thereby stimulating the economy -- and leading to faster-growing corporate profits.

Based on trading in futures markets, traders on average are now assigning only a 15% chance of a quarter-percentage-point rate hike by June, according to the data provider FactSet. As recently as three months ago, the odds stood at 45%.

"Fed communications have shifted noticeably in the last few months," top economists at Bank of America wrote Friday in a report. "They have done a 90-degree turn."

The S&P 500 rose 1.5% in New York trading on Friday, leaving the gauge up 6.7% already this year.  

The shift in the tone from the central bankers came after President Donald Trump criticized Powell -- his own appointee to run the central bank -- for raising rates too quickly and unnecessarily slowing the economy. Powell has insisted that the Fed is an independent institution, and that the pressure from Trump hasn't affected monetary-policy decision-making.  

Officials last raised rates at a meeting in December -- over Trump's objections -- to a range between 2.25% and 2.5%. The benchmark borrowing rate was set close to zero for seven years after the 2008 financial crisis, as part of an effort by former Fed chiefs Ben Bernanke and Janet Yellen to give the economy time to recover.   

The central bank usually raises interest rates when the economy is running hot, because higher borrowing costs tend to cool growth, thus reducing the risk of a disruptive spike in inflation. During parts of the 1970s and early 1980s, consumer prices shot up an annual pace of more than 12%.    

Williams said he says he doesn't see "any worrying signs of inflation building," with consumer prices currently rising at a 2% pace, the Fed's target.

The stock market's drop last year kindled speculation among some investors and economists that the Fed might take extra steps to support growth, such as halting or adjusting its efforts to shrink its balance sheet. The central bank's total assets quadrupled to more than $4 trillion during the financial crisis, as the central bank bought trillions of dollars of U.S. Treasury bonds and mortgage-backed securities as part of an effort to ply the economy with fresh money. 

Williams said that the Fed has been "moving monetary policy back to normal," and that a preset balance-sheet reduction plan was announced and disclosed in the spirit of being "predictable and transparent."

But Williams said remains open to adjusting the plan "if the outlook deteriorates in a material way." 

For now, he said, economic growth appears to be slowing from last year's level of an estimated 2.9% but remains "healthy," with gross domestic product on track to increase between 2% and 2.5% in 2019. 

"A softer economic outlook doesn't mean we should prepare for doom and gloom," Williams said.