US Federal Reserve chair Janet Yellen cautioned Americans not to "overblow" the Federal Reserve's move on 16 December to raise US interest rates a quarter of a point, saying the increase reflects confidence in the US economy.

"I think it's important not to overblow the significance of this first move. It's only 25 basis points. If monetary policy remains accommodative, we've indicated that we will be watching what happens very carefully in the economy in terms of our actual, and forecast, our projected conditions relative to our employment and inflation goals," said Yellen.

Speaking to reporters in Washington, Yellen explained the Fed's decision to raise interest rates for the first time in nearly a decade, and challenged the possibility that the recent expansion might not last.

"I think it's a myth that expansions die of old age. I do not think that they die of old age. So, the fact that this has been quite a long expansion doesn't lead me to believe that it's one that has – its days are numbered," she said.

Fed policymakers are doing all they can to ensure that rates, which have been at rock bottom for seven years, will actually rise on Thursday despite some $2.6tn (£1.74tn) in excess bank reserves flooding financial markets. Yellen also shrugged off the drastic drop in oil prices since June.

"We do not need to see oil prices rebound to higher levels in order for the impact on inflation to wash out. So all they need to do is stabilise. I believe there is some limit below which oil prices are unlikely to rise," said Yellen.

The next big decision for the Fed, likely after a few more rate increases, will be when and how far to go in shrinking its portfolio of Treasury and mortgage assets, either by allowing them to run off naturally or by selling outright, a less likely option. For now it is topping up the balance sheet as assets mature.

Additional reporting by Reuters.