Powell the hawk.

Jerome Powell, the chairman of the Federal Reserve, continued his hawkish tone at the European Central Bank Forum on Central Banking in Portugal on Wednesday, June 20. The Dow Jones Industrial Average I:DJI traded lower after Powell began speaking.

"As is often the case, in the current environment, significant uncertainty attends the process of making monetary policy. Today, with the economy strong and risks to the outlook balanced, the case for continued gradual increases in the federal funds rate remains strong and broadly supported among FOMC participants," said Powell.

"But we have often seen confidence become overconfidence and lead to excessive borrowing and risk-taking, leaving the financial system more vulnerable. Indeed, the fact that the two most recent U.S. recessions stemmed principally from financial imbalances, not high inflation, highlights the importance of closely monitoring financial conditions," said Powell. "Today I see U.S. financial stability vulnerabilities as moderate and broadly in line with their long-run averages. While some asset prices are high by historical standards, I do not see broad signs of excessive borrowing or leverage. In addition, banks have far greater levels of capital and liquidity than before the crisis."

Watch below. 

Stephanie Flanders, moderator of the forum, asked Powell about the U.S. economy in its current state. Powell went into detail on the state of the economy, from the growth on trend to the low unemployment rates. Powell said the Fed believes that "gradual rate increases" are warranted..

"Do you see any advantages to having inflation overshoot for some time?" asked Flanders.

Powell said that wasn't the design of the Fed's approach. The Fed would be concerned if inflation were to persistently run above or below 2%. "And so we haven't said that we're shooting for or we'd like an overshootn...nas I said in my remarks. It doesn't mean that we can stop thinking about resource utilization. It really is just keeping inflation expectations at 2%."

Mario Draghi, president of the European Central Bank, asked Powell about the tariffs and the effect they were having on the economy. 

"If you ask if it [the tariffs] are in the forecast yet, if they're in the outlook [then] the answer is no. For the first time we're hearing decisions to postpone investments ... we don't see it in the performance of the economy and we don't have a way to put it in the outlook just yet."

Flanders then allowed the other panelists to comment on the U.S. tariffs.

Haruhiko Kuroda, the governor of the Bank of Japan, expressed concern about the indirect impact that U.S. tariffs will have on the Japanese economy. The impact could be "significant."

"If this escalation of tariffs by the U.S. and China continues and is actually implemented" it could affect the "supply chain" of the East Asian economies. 

"I dearly hope that this escalation could be rescinded," said Kuroda.

Philip Lowe, the governor of the Bank of Australia, spoke out against the tariffs.

"On trade, I think what's happening is incredibly disturbing," said Lowe. "Can any of us think of any country that has made itself wealthier and boosted productivity by building walls? Probably not."

"The tariffs themselves won't derail global expansion," but the financial markets could face "a lot of turbulence," said Lowe.