By Peter Schroeder - 04/11/11 04:49 PM EDT
Furthermore, the recent jump in prices is not enough to threaten the fledgling economic recovery, and as a result is not enough to force the Fed to change course at this point, she said.
Fed critics contend that the central bank's historically low interest rates — exacerbated by the Fed's massive bond buys as part of its "quantitative easing" program — are driving up prices by causing inflation.
But Yellen said global turmoil in the Middle East and North Africa are putting "significant upward pressure" on oil prices, and droughts in China and Russia, as well as other "weather-related supply disruptions," have pushed a jump in global food prices.
"In my view, the run-up in the prices of crude oil, food, and other commodities we've seen over the past year can best be explained by the fundamentals of global supply and demand rather than by the stance of U.S. monetary policy," she said.
Accusations that the Fed's loose policy is driving prices up "do not seem to hold up to close scrutiny," she said.
Even as prices in the short run are spiking, Yellen maintained that long-term inflation expectations are still "reasonably well anchored."
Her comments echo those offered recently by Fed Chairman Ben Bernanke, who has also maintained that global problems, not the Fed, are to blame.
The Fed has been accused of sowing the seeds of inflation ever since it embarked on a second round of quantitative easing, in which the Fed buys back Treasury bonds in an attempt to drive down private lending rates. Despite the critiques, the Fed has stayed the course on the program, dubbed "QE2," which is due to wrap up at the end of June.
A poll conducted for The Hill last week found widespread concerns about inflation. Sixty-two percent of 1,000 likely voters surveyed they were “very concerned” about inflation, while another 26 percent said they were “somewhat concerned.”
When asked what was causing their concerns about inflation, 61 percent of respondents singled out gasoline prices, while 18 percent said food was to blame. The next highest category, housing, was mentioned by just 9 percent.
Despite Yellen's disavowal that the Fed is to blame for rising prices, she maintained that the Fed is keeping an extremely close eye on inflation, and vowed that the bank will do everything it can to stave off the runaway inflation experienced in the 1970s.
"The FOMC [Federal Open Market Committee] is determined to ensure that we never again repeat the experience of the late 1960s and 1970s, when the Federal Reserve did not respond forcefully enough to rising inflation and allowed longer-term inflation expectations to drift upward," she said. "Consequently, we are paying close attention to the evolution of inflation and inflation expectations."
Ramsey Cox contributed.