The Fed has only raised interest rates three times in the last decade - most recently in March - in a bid to encourage economic growth.
But Ms Yellen said the US economy was now "healthy" and required less help from the central bank.
Investors were unmoved by Ms Yellen's comments, with yields on US Treasury bonds little changed.
Ms Yellen said that "before we had our foot pressed down on the gas pedal trying to give the economy all the oomph we possibly could".
"Now allowing the economy to kind of coast and remain on an even keel - to give it some gas but not so much that we are pressing down hard on the accelerator - that's a better stance of monetary policy," she said at the University of Michigan's Ford School of Public Policy.
Other Fed officials have indicated the central bank will raise rates twice more this year.
"We think a gradual path of increases in short-term interest rates can get us to where we need to be, but we don't want to wait too long to have that happen," Ms Yellen said.
Stocks on Wall Street finished broadly flat ahead of Ms Yellen's appearance.
The Dow Jones rose 1.9 points to 20,658.02, while the S&P 500 edged 1.6 points higher to 2,357.16.
The tech-heavy Nasdaq was 3.1 points higher at 5,880.93.
Many investors are looking ahead to the start of the big banks' earning season which is expected to have gotten a boost from the election of President Trump.
JP Morgan, Citigroup and Wells Fargo are all set to unveil their first-quarter results on Thursday.
There has been speculation that the Trump's administration may relax banking legislation introduced to curb the excesses that led to the financial crisis.
Federal Reserve chair Janet Yellen has said the central bank no longer needs to give the US economy some "oomph".