"The economy has once again surprised us with its strength," Powell said at a press conference after Fed policymakers voted 10-2 to hold the central bank's benchmark interest rate in the 3.50 percent-3.75 percent range following a two-day meeting.

Noting broad internal support for the decision, Powell said the Fed remains "well-positioned" to assess when or whether another rate cut may be needed.

"There could be combinations, infinite numbers of combinations that would cause us to want to move," he said, with labor market weakening or inflation heading back down to the Fed's 2 percent goal as two of those possibilities.

Since the Fed's last policy meeting in December, when it delivered a third straight rate cut, "the upside risks to inflation and the downside risks to employment have diminished. But they still exist," Powell said. "We think our policy is in a good place."

Both Governor Christopher Waller, a contender to replace Powell when his term as central bank chief ends in May, and Governor Stephen Miran, on leave from his job as an economic adviser at the White House, dissented in favor of a quarter-percentage-point rate cut.

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The actual rate decision, which was widely expected by financial markets, was overshadowed during the post-meeting press conference as reporters questioned Powell about threats to Fed independence and whether he intended to stay on at the central bank after his term as central bank chief ends in May, a possibility given new life after the Trump administration opened a criminal investigation into him earlier this month.

President Donald Trump has excoriated the Fed and Powell for failing to deliver the large rate cuts the president believes are needed to stimulate the economy.

Powell said at the time that the probe was aimed at pressuring the central bank to cut rates in line with the president's preferences. The Fed chief on Wednesday declined to comment further on the matter.

But he did have some advice for his successor: "Don't get pulled into elected politics," Powell said, adding that the next Fed chief also should work hard at being accountable to Congress, which oversees the central bank.

The statement from the policy-setting Federal Open Market Committee offered no hint about when another rate cut might come, noting that "the extent and timing of additional adjustments" to the policy rate would depend on incoming data and the economic outlook, phrasing that Powell also used in his remarks.

"We expect the Federal Reserve to remain on an extended pause. Interest rates are close to neutral and labor market conditions are stabilizing," Michael Pearce, chief US economist at Oxford Economics, wrote after the policy decision, anticipating that an eventual decline in inflation, still running about 1 percentage point above the Fed's target, would lead to rate cuts in June and September.

That outlook would likely push the next rate decision to Powell's successor, who is expected to be nominated by Trump soon and confirmed by the Senate in time to lead the June 16-17 meeting.

It may not be a clear-cut decision if price pressures have not begun declining by then. Inflation has shown little progress over the past year and remains "somewhat elevated" in the view of Fed officials who believe prices are still rising because of the Trump administration's imposition last year of new tariffs on imported goods.

Powell said he expects the tariff impact to fade by the middle of this year. If that doesn't happen, it could pose an immediate dilemma for his successor's management of a policy committee scarred by the rapid rise in prices that followed the COVID-19 pandemic and concerned that five years of above-target price increases may make inflation harder to control in the future.

So far, however, Powell says inflation expectations remain in check, allowing the Fed to watch in particular whether the market remains stable.

Though the Fed noted on Wednesday that "job gains have remained low," policymakers also removed language from their prior statement saying that downside risks to employment had risen - an indication they as a group are becoming less worried about a rapid downturn.

Fed officials ahead of this week's meeting had largely characterized the job market as roughly in balance, with the smaller job gains matching the slower growth in the numbers of those seeking employment as a result of the Trump administration's stricter immigration policies. The unemployment rate in December fell to 4.4 percent.

Major US stock indexes lost a bit of ground after the release of the policy statement and closed largely flat. The yield on the 10-year Treasury note ticked up to around 4.25 percent, while the yield on the two-year Treasury note was largely unchanged around 3.57 percent. Interest rate futures moved to price in the next Fed rate cut at the June meeting.

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