Last month, President Donald Trump and Chinese leader Xi Jinping agreed to 90-day ceasefire as a step toward defusing tensions.
Powell denied the criticism that the Fed's gradual reduction of its holdings of Treasuries, mortgage bonds and other assets - amounting to 4.5 trillion dollars when the Fed began its balance sheet normalization program in October 2017 - had exacerbated the stock market turbulence in the fourth quarter of 2018.
It wasn't just the Fed chairman's observations about the potential for rate hikes in 2019 that had investors buying, but assurances about Powell's job security in the face of increasing pressure from President Trump.
"With the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", Powell was quoted as saying in The Washington Post. The U.S. probably added 180,000 jobs in December, based on the median projection in a Bloomberg survey of economists. Some analysts said investors were acting as if a recession was on the horizon, despite a lack of evidence that the USA economy is struggling. Under the law that governs the Federal Reserve, a president can only remove a Fed chairman for cause.
In December, Powell said that the Fed's balance sheet reduction was on "autopilot". He did not address Fed forecasts from December that sketched out two more rate rises this year, but, combined with the messages of Fed presidents who in recent days downplayed that tightening plan, he delivered the sort of temperate message investors had hoped to hear. Do we need to move more, faster?
Her comments, from a sometimes hawkish Fed official, highlighted the change in tone at a central bank that, after two years of roughly quarterly rate increases, was now assessing the risks of going too far.
Traders said Powell's comments were perceived as dovish because he said the Fed had no preset path for policy and could be patient when it comes to future interest rate hikes.More news: China's Chang'e-4 touching down on far side of the moon
More news: Hundreds Rally As 7-Year-Old Houston Girl’s Killer Remains Unknown
More news: Ukrainian Orthodox Church breaks away from Russian influence
"The problem in my opinion is Treasury and the Fed", Trump said.
The gains, also driven by strong job creation data, reversed sharp falls from a day earlier, extending the recent rollercoaster ride in markets.
President Trump and Democratic leaders failed to strike a deal on Friday to end a partial shutdown of the United States government as they fought over Trump's request for $5 billion to fund a wall on the border with Mexico lawmakers said. Yet signs are growing that Trump's tit-for-tat trade war with China is taking a toll: this week, tech giant Apple and grains trader Cargill warned about weaker sales in China.
"No one knows whether this year will be like 2016", Powell said in remarks that appeared to be scripted at the start of the event.
But Jason Schenker of Prestige Economics suggested the Fed could still take a hard line.
Jerome Powell gave the US economy a thumbs-up review last month.
"The markets are pricing in downside risks. and they are obviously well ahead of the data, particularly if you look at this morning's labor market data", Powell said.