WASHINGTON — Janet L. Yellen, the Federal Reserve chairwoman, told Congress on Tuesday that it should focus on policies aimed at improving the productivity of the American economy rather than increasing short-term growth.
Ms. Yellen also said the Fed remained pleased with the performance of the economy, and expected to continue increasing its benchmark interest rate.
Job growth remains strong, and inflation is rising toward a healthier level, Ms. Yellen said in prepared testimony to the Senate Banking Committee.
“At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Ms. Yellen said, referring to the Federal Open Market Committee, which sets monetary policy.
Ms. Yellen did not address the Fed’s role as a financial regulator in her opening remarks, but the subject is likely to take center stage when Ms. Yellen fields questions from the banking committee later Tuesday morning.
The new chairman of the banking committee, Senator Michael D. Crapo, Republican of Idaho, said in his prepared remarks that he hoped the Fed would cooperate with the Trump administration in its efforts to reduce financial regulation.
President Trump and congressional Republicans want to roll back some of the rules imposed on American banks in the aftermath of the financial crisis.
“It is time to reassess what is working and what is not,” Mr. Crapo said. “Financial regulation should strike a proper balance between the need for a safe and sound financial system and the need to promote a vibrant, growing economy.”
In her testimony, Ms. Yellen emphasized the health of the economy.
The unemployment rate was little changed over the last year, standing at 4.8 percent in January, even as the economy added an average of 190,000 jobs a month during the second half of 2016, and an additional 227,000 jobs in the first month of 2017.
Inflation also showed signs of rising to a healthier level. Prices increased by 1.6 percent during 2016, a full percentage point more than in the previous year, although that is still below the Fed’s preferred 2 percent annual pace.
Fed officials predicted in December that the central bank would raise its benchmark rate three times during 2017, lifting the rate from its current range between 0.5 percent and 0.75 percent to a range of 1.25 percent to 1.5 percent.
Ms. Yellen did not address those expectations explicitly, but her remarks are likely to reinforce expectations among investors that the Fed remains on track.
Other officials have been more direct. Charles Evans, president of the Federal Reserve Bank of Chicago, told reporters last week that the expectation of three increases “is not unreasonable.” The comments are particularly noteworthy because Mr. Evans remains one of the strongest proponents of the Fed’s stimulus campaign.
The Fed’s next policy-making meeting is in March, but investors are betting that the Fed will not increase its benchmark interest rate until a meeting in mid-June.
The Trump administration’s economic plans have clouded the Fed’s outlook.
Mr. Trump has repeatedly called for measures to stimulate economic growth, like tax cuts and infrastructure spending. Fed officials, who take the view that the economy already is growing at something close to the maximum sustainable pace, have cautioned that fiscal policy should focus on improving long-term growth.
If fiscal policy makers provide short-term stimulus, Fed officials have said the central bank would seek to offset the effects by increasing interest rates more quickly.
“While it is not my intention to opine on specific tax or spending proposals, I would point to the importance of improving the pace of longer-run economic growth and raising American living standards with policies aimed at improving productivity,” Ms. Yellen said in her testimony Tuesday.
She then repeated a warning about the dangers of too much federal debt.
“I would also hope that fiscal policy changes will be consistent with putting U.S. fiscal accounts on a sustainable trajectory,” she said.