Powell, the Fed chairman since February, made the remarks in a speech Friday during the annual meeting of the American Economic Association and Allied Social Science Association in Atlanta.
"With muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves," he said.
Powell's remarks, which followed an optimistic jobs report Friday, helped spur the Dow Jones Industrial Average to rise 550 points in early trading.
Sharing the stage with former Fed chairs Janet Yellen and Ben Bernanke, Powell cautioned that while there's economic optimism, the market has plunged from its peak on fears of slowing global growth and the Trump administration's trade fight with China -- and said all factors will be considered when the Fed meets later this month to discuss interest rates.
"We're listening carefully to that and we're going to be taking that downside risk into account," he said.
The chairman added that if its normalization plan becomes a problem, the central bank would not be slow to adjust.
"We wouldn't hesitate to make a change," he said.
The Federal Open Market Committee will meet again Jan. 29 and 30 to discuss potentially raising interest rates.
Financial markets had fallen sharply and experienced some turbulence in 2018, climaxed by a rocky December that continued into the first days of January.
In December, the Fed raised rates a quarter-point to 2.5 percent, drawing the ire of President Donald Trump. Overall, it was the ninth increase since the beginning of normalization of rates in December 2015.
"It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory," Trump wrote on Twitter after that rate hike.
Powell said Friday that despite Trump's criticism, he would not resign as Fed chair if the president asked him to.