Federal Reserve Chair Janet Yellen said Wednesday that inflation is expected to rise slowly from current low levels but not go much beyond the Fed's two percent target.
Chair of the Federal Reserve Janet Yellen is pictured at a meeting at the International Monetary Fund and the World Bank Group on April 12, 2014 in Washington
Price pressure in the US economy remain subdued, she said, in part because of slowing energy price rises and a fall in import prices.
"Longer-run inflation expectations have remained remarkably steady, however," and will slowly push up toward two percent, Yellen said in a speech to The Economic Club of New York.
The Fed "is well aware that inflation could also threaten to rise substantially above two percent. At present, I rate the chances of this happening as significantly below the chances of inflation persisting below two percent," she said.
Detailing the issues facing the Federal Open Market Committee, the Fed's monetary policy body, Yellen said the group sees that the economy will continue to grow at a "moderate" pace this year.
"The unusually harsh winter weather in much of the nation has complicated this judgment, but my FOMC colleagues and I generally believe that a significant part of the recent softness was weather-related," she said, rather than a material change in growth.
The Fed will keep cutting back its bond-buying stimulus program, she said. But it will keep its benchmark federal funds interest rate at the current low 0-0.25 percent level to help strengthen growth, as long as unemployment remains high and inflation tame.
Yellen acknowledged that there is continued debate over how strong or weak the jobs market is, after the official unemployment rate has fallen to the current 6.7 percent.
But she made clear she does not take that as fully indicative of the still-significant slack in the market.
She pointed to the low participation rate in the jobs market and the high number of long-term unemployed as reasons that wages continue to be fairly flat.
"My own view is that some portion of the decline in participation likely represents labor market slack," she said.
The FOMC still sees a return to "normal" employment -- 5.6 percent or lower -- as "more than two years away."