Powell said the Fed's policy decisions will depend on economic indicators and the future outlook.
Furthermore, flexibility would also apply to its holdings of Treasuries and mortgage-backed securities, which signaled a diversion from statements that the central bank would resume its asset purchases if economic data warranted a rate cut. He assured lawmakers that the Fed is merely trying to refine its approach so it can meet its current 2-percent inflation goal.
The Fed has been trimming its balance sheet - bulked up by trillions of dollars of bond-buying during the post-crisis years to help keep interest rates low and bolster the economy - by as much as $50 billion a month since October 2017.
"There is a lot of uncertainty around the actual level", Powell said when McHenry asked about where the size of the balance sheet will eventually settle.
"We going to be in a position.to stop runoff later this year", he said, adding that doing so would leave the balance sheet at about 16 percent or 17 percent of GDP, up from about 6 percent before the financial crisis about a decade ago. The greenback's earlier advance was also helped by news of a jump in the United States consumer confidence index, which came as Powell spoke.
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Minutes of the January 29-30 Federal Open Market Committee meeting, released on February 20, indicate that participants thought it would be "desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year". "We're in no rush to make a judgment about changes in policy".
"He's made comments about the Fed having an exchange rate objective in order to support his trade plans, or possibly targeting the USA balance of trade", she said.
"We view economic conditions as healthy and economic outlook as favourable", Mr Powell said, projecting that the economy would expand at a solid pace, albeit somewhat slower than last year's, and the job market would remain strong.
Yellen said she did not think that Trump's sharp attacks on Powell and the Fed past year were having a significant impact yet on the Fed's ability to manage the economy.
However, longer-run trends, "such as relatively stagnant incomes for many families and a lack of upward economic mobility among people with lower incomes, also remain important challenges", he said. The U.S. central bank had raised interest rates four times in 2018.