WASHINGTON: Federal Reserve Chair Janet Yellen on Wednesday stuck to her forecast for an increase in the Fed`s key interest rate later this year, predicting a pick-up in the US economy.

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

In prepared testimony to Congress, Yellen expressed relative confidence in the economy going ahead, suggesting it could surprise on the upside.

The labour market still showed `some` slack, she noted one reason accommodative monetary policy 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,` Yellen 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.

Moreover, she allowed, the economy `also might snap back more quickly` than generally expected as the drag from the slow first half of the year dissipates.

The US central bank has kept markets on edge for a raise in the federal funds rate, which has been locked extraordinarily at zero since the end of 2008 to pull the economy back from the Great Recession.-AFP