WASHINGTON, July 15

Federal Reserve Chair Janet Yellen stuck to her forecast for an increase in the Fed’s key interest rate later this year on Wednesday, predicting a pickup in the US economy.

But Yellen also warned that continued turbulence from Greece and China poses risks to the US growth.

In prepared testimony to Congress, Yellen said the labour market still showed ‘some’ slack, suggesting accommodative monetary policy from the US central bank was still merited despite the unemployment rate falling to 5.3 per cent.

“Too many people are not searching for a job but would likely do so if the labour market was stronger,” she said.

“And, although there are tentative signs that wage growth has picked up, it continues to be relatively subdued, consistent with other indications of slack.”

Even so, she said, prospects are for more improvement in the coming months that would support the Fed moving toward its first rate increase since 2006.

She added, economy ‘also might snap back more quickly’ than expected as the drag from slow first half of the year dissipates.