Federal Reserve Chair Janet Yellen said Tuesday that the U.S. economy faces a number of uncertainties that require the Fed to proceed cautiously in raising interest rates.
In delivering the Fed's twice-a-year economic report to Congress, Yellen cited a slowdown in job growth in April and May and said the Fed will be watching carefully to see whether the weaker momentum is temporary or a sign of a bigger problem.
Yellen expressed concerns about the global economy, including slower growth in China and the upcoming vote in Britain over leaving the European Union. She also noted weak productivity growth in the U.S. and persistently low inflation.
Yellen emphasized the same cautious approach the central bank took following its meeting last week when it left a key interest rate unchanged. The Fed boosted its benchmark rate by a quarter-point in December to a range of 0.25 percent to 0.5 percent and at the time projected another four rate hikes this year.
But since December, financial market turbulence at the beginning of the year, a global economic slowdown and a sharp drop in oil prices have kept the Fed on the sidelines. Fed officials are now projecting just two rate hikes this year. At last week's meeting, the number of officials who forecast just one rate hike this year climbed to six from just one in March.
In her testimony Tuesday before the Senate Banking Committee, Yellen acknowledged the problems weighing on the economy.
"Economic growth has been uneven over recent quarters," she said. "Subdued foreign growth and the appreciation of the dollar weighed on exports while the energy sector was hit hard by the steep drop in oil prices since mid-2014. In addition, business investment outside of the energy sector was surprisingly weak."
During the question and answer session, Yellen was asked about the likelihood that the country could be in a recession by the end of the year.
She said she expects the U.S. economy to grow and described the possibility of a recession this year as "quite low."