"We have the ability to be patient and watch patiently and carefully as we see the economy evolve and figure out which of these two narratives is going to be the story of 2019", Powell said.
The S&P gained 3.43 per cent, and the yield on the 10-year Treasury note rose 11 basis points. Traders were already wary of statements Powell made in December about rate hikes.
Recessions are typically caused by inflation rising quickly and forcing the Fed to respond with high interest rates or some sort of bubble in markets.
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. It would not want to wait too long to see overseas weakness affect the US economy, he added.
Speaking at the Economic Club of Washington, Powell reiterated that the U.S. central bank has the ability to be patient on monetary policy given stable price measures.
Powell's comments on Fed patience were similar to the message in the minutes of the Fed's December meeting as well as the comments of other Fed officials this week.
As inflation shows no signs of accelerating much beyond the Fed's two per cent target, there is no urgent need to raise the benchmark lending rate further, he said.
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. "That was conditional on a very strong outlook for 2019, an outlook that may still happen".
Even so, US central bankers face a challenging year that's complicating their communication.
Fed officials and many forecasters expect growth to slow in 2019, but to remain strong enough to continue generating jobs and keeping the unemployment rate near its nearly 50-year low.
Powell also said he didn't see signs of a recession in the near term, but noted that his "principal worry" was a slowdown in global growth and that while the U.S. economy appears "solid", a slowdown in China "is a concern". If conditions weaken, the Fed would react.
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 principal worry is global growth, he said in questioning by David Rubenstein, the co-founder of private-equity firm Carlyle Group, where Powell was previously a partner.
"If we have an extended shutdown, I do think that would show up in the data pretty clearly", Powell stated.