Powell also addressed the issue that the central bank was overusing interest rate policy in an effort to prevent the economy from overheating. Technology stocks have recently been a laggard to major indices, but Friday saw the entire sector higher, with names like Netflix ($NFLX), Amazon ($AMZN), Google-parent Alphabet ($GOOGL), Facebook ($FB) and even Apple ($AAPL) all closing up more than 4 percent.
The President has repeatedly criticized the Fed's increasing monetary restrictions and interest rates, which he blamed for the market drop in a phone call with Fox News host Shannon Bream in October.
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In the cash market, the benchmark S&P 500 Index settled at 2531.94, up 84.05 or +3.17%. "We're hearing a lot from different groups of people about the role the balance sheet normalization may be playing in the market", Powell said.
Compared to comments he made after the Fed raised rates last month, "it's not that he's changed his message. but that he explained it more patiently and in greater detail", said Lou Brien, market strategist at DRW Trading in Chicago.
The head of the Fed, once confirmed by the Senate, can only be removed "for cause", not a policy disagreement.
Building on a comment by Yellen that the Fed in the past has often killed expansions by jacking up rates to fight too-high inflation, Bernanke said he didn't see anyone "hiding behind the curtain" waiting to slay the current upturn, including the central bank. Asked if he had had any face-to-face meetings with Trump, Powell said he had not although he said previous Fed leaders have had discussions from time to time with previous presidents.
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The two former central bank chairs also threw their support behind Powell and Fed independence following months of escalating criticism from Donald Trump.
In December, Powell said that the Fed's balance sheet reduction was on "autopilot". "We are always prepared to shift the stance of policy and to shift it significantly" if needed.
The pace of Fed rate hikes and the lowering of the balance sheet, which tends to put upward pressure on interest rates, had both been concerns of investors in recent months.
The recent market turbulence has posed a dilemma for the Fed, as a seeming loss of confidence in financial markets about the US economy's prospects was offset by upbeat data from the real economy, including a strong December jobs report.
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"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.