Powell noted in prepared remarks that near-term risks to inflation are tilted to the upside and risks to employment to the downside, which he called a challenging situation.

Two-sided risks mean that there is no risk-free path, Powell said. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation.

If we maintain restrictive policy too long, the labor market could soften unnecessarily, he continued. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate.

Powell said the Fed's decision to cut interest rates by 25 basis points last week reflected increased downside risks to employment that shifted the balance of risks to achieving the central bank's dual goals.

This policy stance, which I see as still modestly restrictive, leaves us well positioned to respond to potential economic developments, he said.

Powell reiterated that monetary policy is not on a preset course and said future interest rate decisions would be based on incoming data, the evolving outlook, and the balance of risks.

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