The Fed chair, who has been publicly criticised repeatedly by President Donald Trump in recent months, warned that if there is an "extended shutdown", it would have an impact on the economy that "would show up in the data very clearly".
Federal Reserve Chairman Jerome Powell said he doesn't see a US recession in the near future, despite the rising likelihood of slowing growth elsewhere around the globe.
"Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully as we. figure out which of these two narratives is going to be the story of 2019", Powell said at the Economic Club of Washington.
The balance sheet "will be substantially smaller than it is now", though bigger than it was before the crisis, Powell said.
Speaking at the Economic Club of Washington, Powell reiterated that the USA central bank has the ability to be patient on monetary policy given stable price measures.
Speaking to an audience in Washington, Powell delivered the same reassuring message of restraint and flexibility that bolstered markets last Friday. He said he didn't know the exact level.
The central bank's quarterly forecast in December showed Fed officials still expect two more increases in 2019. Minutes of the December meeting released on Wednesday showed that many officials felt the central bank "could afford to be patient about further policy firming", indicating the Fed could place interest rates on hold through March or longer as it waits for clarity on risks to global growth that could affect the USA economy. Bloomberg's financial conditions index has retraced much of its December tightening.
North Korean leader back on track!
US Secretary of Commerce Wilbur Ross on Monday said that China's economy is more vulnerable to the fallout from the trade dispute. North's Korean Central News Agency said Mr Kim departed on Monday afternoon with his wife Ri Sol Ju and other top officials.
December figures for the Fed's preferred gauge of inflation - a separate measure related to consumption - are scheduled for release on January 31, though the report could be delayed because of the partial government shutdown.
At the same time, Powell acknowledged that financial markets are expressing concern about risks. "The principal worry we have is global growth" in Asia, Europe and elsewhere.
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.
Trump has urged the Fed not to raise interest rates at all this year.
He agreed with the prevailing view of the USA economy slowing to around 2.25-2.5 per cent this year, with unemployment holding around the current 3.9 per cent.
The U.S. central bank raised rates four times past year in the face of robust economic growth and unemployment that touched its lowest level in half a century.