Federal Reserve Chairwoman Janet Yellen said on Tuesday that the US central bank will continue to keep interest rates at historic lows, while proceeding with its plan to taper the controversial stimulus measure known as quantitative easing.

The Fed will keep rates at between 0 to 0.25 per cent, she said.

Noting that the US unemployment rate had improved to 6.1 per cent and that inflation was still less than the Fed’s target of 2 per cent, “a high degree of monetary policy accommodation remains appropriate,” Yellen told a congressional committee.

“If incoming data continue to support our expectation of ongoing improvement in labour market conditions and inflation moving back toward 2 per cent, the committee likely will make further measured reductions in the pace of asset purchases at upcoming meetings, with purchases concluding after the October meeting,” she said.

Any change to this plan would not “hinge on one or two factors,” she said, but would rather be contingent on a “wide range of information.” The Fed’s current round of quantitative easing — the monthly purchase of government-linked bonds — began in September 2012 at $85 billion a month.

As the economy has improved, the Fed has slashed its monthly bond purchases and, as of July, the amount was down to $35 billion a month.

Yellen said she considered the sharp decline in first quarter gross domestic product to be the result of “transitory factors” and that the Fed continues “to anticipate that economic activity will expand at a moderate pace over the next several years....”.

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