In the past week, Chairman Jerome Powell and other officials have stressed that the central bank will be patient and flexible in responding to economic data, including the potential effects of the trade war.
In his remarks before the Economic Club of Washington, Powell described the economy as strong at the end of past year, with the lowest unemployment levels in a half-century and solid gains in wages.
Powell was also asked about the Fed's plans to keep trimming its holdings of Treasury bonds and mortgage-backed securities, which it had purchased following the 2008 financial crisis as a way to keep long-term interest rates low and support an economy as it struggled to climb out of the worst recession since the 1930s.
US central bankers are refining their message after the hawkish tone of their December 19 statement and forecasts for further rate hikes in 2019 roiled financial markets.
"Chairman Powell chose to make no news at his latest interview".
Speaking to an audience in Washington, Powell delivered the same reassuring message of restraint and flexibility that bolstered markets last Friday. He said the Fed's aim was to return the balance sheet to a "more normal level" but didn't specify what that level will be. While the central bank last month penciled in two interest-rate hikes in 2019 following four in 2018, officials are now signaling a potential pause through March or longer amid headwinds from trade, the USA government's partial shutdown and global growth risks.
The central bank's quarterly forecast in December showed Fed officials still expect two more increases in 2019.
On Thursday, Powell said he hasn't seen anything to indicate that the risk of a recession is elevated.
He also anxious about the lack of key economic statistics during the government shutdown that the Fed uses to take the temperature of the economy.
"The principle worry I would have is really global growth", Powell said, but he added: "I still think the mostly likely baseline case for China is another year of solid growth". Fed chairs have met with presidents in the past, he added.
While there is wide agreement that the U.S. economy will grow more slowly than the roughly 3 per cent rate of 2018, there's a lot of debate about how fast the slowdown will be.
Trump has urged the Fed not to raise interest rates at all this year.
Powell also noted that it's a problem that the Commerce Department is mostly shuttered, which means key economic data such as retail sales and growth in gross domestic product won't be released later this month unless the government reopens.