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Yellen: Keep Fed Independent

Federal Reserve Chair Janet Yellen testifies before the House Financial Services Committee hearing on monetary policy and the state of the economy, on Capitol Hill in Washington, July 15, 2015.

The head of the U.S. central bank says increased congressional supervision of the Federal Reserve could reduce its independence and hurt the economy.

Fed Chair Janet Yellen spoke Wednesday at a contentious hearing of the House Financial Services Committee. She said efforts to "further increase transparency" could "undermine the Federal Reserve's ability to make policy in the long-run best interest of American families and businesses."

Committee Chairman Jeb Hensarling and other Republicans are investigating a leak of confidential information from the Fed about bond-buying plans. Fed officials say they have not provided some of the information requested so as to not interfere with a Justice Department investigation of the matter.

Fed oversight

Hensarling and other Republicans also are working to increase oversight of the bank's decision-making process.

The central bank's supporters say it needs independence from political pressures so it can make decisions, such as raising interest rates that are good for long-term economic health, but may be politically unpopular.

Yellen said Fed officials expect to raise slightly interest rates, sometime later this year if the job market continues improving and inflation rises closer to the 2 percent level some experts think is good for growth.

The bank cut interest rates to record low levels during the financial crisis in a bid to boost economic growth. Economists say at some point the recovering economy no longer will need such a crutch, warning that continuing these policies for too long could spark damaging inflation.

Improvements, obstacles

Yellen said the economy has created 12 million jobs since the recession and fewer people are now suffering long-term unemployment or stuck with part-time work when they want full time employment.

The Fed chair said "headwinds" slowing U.S. economic growth — such as the rising value of the dollar that makes U.S.-made exports more expensive — eventually will diminish.

She also said the improving economic outlook, though, could be hurt by the "difficult" situation in Greece, and by China's "high debt, weak property markets and volatile financial conditions."