Federal Reserve Chair Janet Yellen says inflation is expected to rise slowly from current levels to the U.S. central bank's two percent target rate.
In her first major policy speech, Yellen told the Economic Club of New York the low rate of inflation appears due to "temporary" influences, such as the deceleration in consumer energy prices. She said longer-run inflation expectations, though, have remained steady.
She said the Fed is not likely to raise interest rates until its inflation and unemployment goals are reached.
Yellen also cautioned Wednesday that officials still predict only a gradual return to full employment during the next two to three years, even as she praised the country's recovery thus far.
"Nearly five years into the expansion that began after the financial crisis and the Great Recession, the recovery has come a long way," she said. "More than 8 million jobs have been added to non-farm payrolls since 2009, almost the same number lost as a result of the recession."
Yellen said an effective federal policy must respond to the "unexpected twists and turns" of an uncertain economy as the Fed judges when to finally tighten monetary policy after years of unprecedented stimulus.