Powell said that the current circumstances justify the gradual approach.
"The economy is strong, inflation is close to our target of 2 percent, and most people who want work find one," he said. "My colleagues and I keep a close eye on the incoming data and we determine the policy to do what monetary policy can do to support continued growth, a strong labor market and inflation close to 2 percent."
Much of the speech was given to a history of the Fed's actions from the period around inflation in the 1970s. Policy makers, he said, have learned over the years that vigilant measures must be taken to ensure that inflation and unemployment remain at a healthy level.
Especially when it comes to inflation, Powell said the Fed has learned that inflation sometimes appears on the financial markets for general price pressures. History has shown that "doing too little with higher costs goes beyond doing too much" when trying to keep inflation under control.
Should the inflation expectations become entrenched in both directions, the Fed would "do what it takes" to control the problem, he said.
But more generally, Powell said that current conditions do not suggest a problem with inflation expectations. The Fed targets 2 percent as a healthy level, and current data suggests that the economy is at or around that level. Powell said, however, that he does not see inflation move substantially higher. in an economy that he said performs well.
"With solid confidence from households and businesses, a healthy level of jobs, rising incomes and tax incentives, there is good reason to expect this strong performance to continue," he said.
The Fed has also been in the news lately when President Donald Trump has criticized continuing to raise interest rates.
Powell did not mention the president's remarks in his speech, although a few other Fed officials have told CNBC that they are committed to staying independent of political pressure.