"There is a lot of uncertainty around the actual level", Powell said when McHenry asked about where the size of the balance sheet will eventually settle.
Yellen said she did not think that Trump's sharp attacks on Powell and the Fed previous year were having a significant impact yet on the Fed's ability to manage the economy.
"The rand has, along with emerging markets, held steady on Powell indicating that due to uneven global growth dynamics, the FOMC would be patient with respect to interest rate adjustments; more testimony is to follow today", Nedbank analysts said in a note.
Nevertheless, the Fed chief cautioned about "some crosscurrents and conflicting signals" seen over the past few months. "We're going to have to find it over time", Powell said. He testified about the central bank's monetary policy, including the balance sheet runoff and future rate decisions.
Trump a year ago was sharply critical of the Fed's string of interest rate hikes, saying they were depressing stock prices and represented his biggest threat.
The Fed now estimates that gross domestic product (GDP) grew by slightly less than 3 per cent previous year.
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US homebuilding tumbled to a more than two-year low in December as construction of both single and multi-family housing declined, which overshadowed the rebound in consumer confidence in February after three months of declines. He said he would closely watch emerging risks, including a slowdown in growth in China, Europe and elsewhere, and a severe bout of instability that hit the stock market in the final three months of previous year.
Amid the risks, Powell said that the solid increase in the past year in the proportion of Americans working or looking for work was very encouraging.
"Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier previous year", Powell said.
Investors will be keeping an eye on the U.S.
Powell's Senate testimony will be followed by an appearance Wednesday before the House Financial Services Committee.
The Fed in January left rates unchanged in a range of 2.25 per cent to 2.5 per cent. As the bank takes on a patient approach to rate decisions, Powell explained what economic conditions the Fed will be monitoring for future moves. Trump charged that the Fed's string of rate hikes had triggered the big declines in stock prices and were a mistake because inflation was not a threat.