Federal Reserve Chair Janet Yellen told Congress Tuesday the economy is improving but still needs the central bank's support, refusing to provide a specific timetable for raising short-term interest rates.
"There's no formula or mechanical answer I can give you," Yellen said when pressed by Sen. Mike Crapo, R-Idaho, ranking member of the Senate Banking Committee.
She added, "The economic outlook is very uncertain."
Yellen testified before the committee as part of her semiannual report on monetary policy to Congress.
Stocks fell as Yellen began her testimony at 10 a.m. ET and all indexes were down at 11:30 a.m.
With inflation rising and the employment rate falling rapidly, some economists and lawmakers have said the Fed should gear up to raise its benchmark short-term interest rate sooner than planned. Although the Fed is winding down its bond buying stimulus, Fed policymakers have indicated only that they plan to raise the rate near zero six financial crisis -- sometime in 2015.
Yellen said several labor market indicators, such as share of the population in the workforce, remain low. She said is the ranks of the long-term unemployed are still at "unprecedented levels historically."
Yellen also downplayed concerns about inflation, which has been picking up, but at 1.8%, remains below the Fed's 2% target. Noting that wage gains remain meager, she said they're "not rising to the point where they can give way to inflation."
Noting the economy still faces headwinds as a result of the Great Recession, such as low productivity growth, Yellen told lawmakers: "We have seen false dawns" before.
She said the economy's 2.9% decline in output in the first quarter "appears to result in a transitory factors " and recent data suggest that growth rebounded in the second quarter. But she added "this bears close watching."
She also noted that housing sector "has shown little recent progress."
"While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing."