But for now, Yellen told members of the House Committee on Financial Services that the economy remains strong enough for the Fed to continue its plans to gradually tighten policy.
USA stocks were higher in late morning trading on Wednesday, with the Dow hitting a record, after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach the neutral rate.
The real yield -- which is the nominal yield minus inflation - of the bond is now minus 1.4 per cent, up from minus 2 per cent last August.
Officials have also not said when they'll stop the process of roll-off, which leaves open how big the balance sheet will still be once the process of getting it back to a more normal size has run its course. "So this is putting upward pressure on interest rates and the USA dollar", said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
For now, most markets expect one more interest-rate increase in the United States this year, and perhaps some reduction in the Fed's huge balance sheet. Brent crude oil prices increased 1.6 percent to to $48.29 per barrel in morning trading Wednesday. Yellen said she did not expect the kind of large-scale economic disruptions of the type suggested by Dimon.
Should Yellen express a hawkish tone regarding monetary policy, or even hint at some form of timeframe for changes, then the US Dollar will likely strengthen against the Euro, conversely, if she expresses a cautious attitude then fed rate hike speculation will dampen, reducing demand for the "Greenback".
"I expect, and certainly hope, that this will go smoothly and it will be a gradual and orderly process", Yellen said.
The report also echoes Fed statements that activity slowed in the first quarter largely due to transitory factors, including a lull in consumer spending, notably on energy given the unseasonably warm winter.
Higher US interest rates and Treasury bond yields raise the opportunity cost of holding gold, which yields nothing and costs money to store and insure.
"Because the neutral rate is now quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance", Yellen will tell Congress.
The Fed increased the interest rate for federal funds rate by 0.25 of a percentage point at its March and June meetings, bringing the target to a range of 1 to 1.25 percent.
"The key takeaway is how confident Yellen is that rate hikes are needed over the next few years, which means there's a commitment that inflation will need to be combated a bit", said Juan Perez, a currency trader at Tempus Inc.
As the USA economy is back on track for steady growth, Fed policymakers are preparing to unwind its crisis-era policies to avoid igniting inflation pressures or pumping up asset bubbles.