Manuel Balce Ceneta/AP
On Wednesday, the FOMC announced, that it left its benchmark rate unchanged in a range of 0.25% to 0.50%, as expected.
The Fed's "dot plot", with expectations for future interest rates, showed that the Fed now expects to raise rates just twice this year. In December, it signaled four rate hikes. The Fed also lowered its economic outlook.
In her press conference, Yellen said it would be better to raise rates quickly if the economy accelerates than to fall behind the curve and hastily cut if the economy begins to falter. And most FOMC members anticipate that rates would gradually rise if the economy continues to improve.
She said "April remains a live meeting" to raise rates. There's no scheduled press conference then, and that casts some doubts on whether the Fed could hike.
Yellen noted that the Fed is not actively considering negative interest rates, and is studying their effects in other countries, which include Japan.
On why the Fed lowered its rate-hike expectations, Yellen said the committee felt that achieving its desired economic outcomes would require a lower path of interest rates than what it saw in December.
She said the Fed could overshoot or undershoot on its 2% inflation target, and its tolerance for doing so in either direction is equal. She noted the divergence between survey-based measures of inflation (which have been low) and market-based expectations (which have been on the high side.)
Yellen said the Fed's economic outlook had not changed much since the December meeting. The labor market continues to strengthen, labor-force participation has turned up, and inflation is rising slowly.
She also acknowledged that financial conditions have recently improved, following the volatility very early in the year. At the same time, international economic growth is slowing down. She noted that mortgage rates and corporate-borrowing costs have fallen.
A big influence on inflation has low oil prices. Yellen said she doesn't expect oil prices to rise to the pre-crash levels, but to stabilize. If oil moved up to $50, it would slightly improve the Fed's outlook for inflation although it may not have huge policy significance, she said.
On a question of why voters are most concerned about the economy, she noted that inequality has been rising for many years, although household balance sheets are much improved.
She said the Phillips curve - which tracks the relationship between unemployment and inflation, and some say is broken - is still relevant.