The Federal Reserve is monitoring developments on trade policy and "will act as appropriate" to ensure the U.S. economic expansion continues, Fed Chairman Jerome Powell said June 4.

Powell kicked off his opening remarks at a Fed conference with a mention of trade tensions between the U.S. and other countries, which have prompted increased worries over the global growth outlook. The Fed does "not know how or when these issues will be resolved" but is keeping an eye on them, Powell said.

"We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective," Powell said.

The Fed has kept its benchmark federal funds rate unchanged this year, pausing its campaign of gradual interest rate hikes and saying it will be "patient" in changing interest rates again.

But the trade battles, particularly President Donald Trump's planned 5% tariff on Mexican imports, have added to market expectations that the Fed will cut interest rates this year.

St. Louis Fed President James Bullard, one of the Fed's more dovish members, said June 3 that a rate cut "may be warranted soon" to help get inflation back to 2% and to guard against risks of greater trade uncertainty. Bullard is a voter this year on the Fed's rate-setting Federal Open Market Committee, which meets again June 18 and 19.

It is not clear whether others at the Fed are on the same page as Bullard at the moment. In an interview with CNBC, Chicago Fed President Charles Evans said the Fed's wait-and-see stance remains appropriate and that the economy's fundamentals remain solid. Treasury yields have dropped sharply in recent days, which "would suggest that the market sees something that I haven't yet seen in the national data," Evans said. Evans is also a voter on the FOMC this year.

Fed Vice Chairman Richard Clarida has also said the Fed should stick with its patient stance, but he has indicated he is open to a rate cut if the U.S. experiences a "persistent shortfall" in inflation or if the Fed sees a "material downside risk" to its outlook.

Powell and other top Fed officials are gathering at a conference at the Chicago Fed that is largely focused on longer-term issues, including whether global declines in interest rates and muted inflation give the Fed less room to respond during the next recession. The issue has "become the preeminent monetary policy challenge of our time," making it more likely that the Fed would have to cut short-term interest rates to near-zero levels again and reach the effective lower bound of interest rates, Powell said.

In that world, the Fed's likelihood of turning to unconventional policies such as its crisis-era quantitative easing purchases is greater, Powell said, adding that he hopes those episodes "will be rare."

"Perhaps it is time to retire the term 'unconventional' when referring to tools that were used in the crisis," Powell said. "We know that tools like these are likely to be needed in some form [again]."