US Federal Reserve Chief Janet Yellen
Janet Yellen is chair of the US Federal ReserveReuters

There is "considerable uncertainty" about the prospects for the powerhouse US economy, according to the chair of the US Federal Reserve.

Janet Yellen said that long-term unemployment remains a serious concern and noted that inflation was still falling short of the Fed's 2% target. She also said policymakers were aware that the financial system reforms were still ongoing.

US GDP also tumbled by 2.9% in the first-quarter of 2014 in its worst three-month performance for five years off the back of particularly bad weather and lower-than-expected consumer spending.

"Although the economy continues to improve, the recovery is not yet complete. Even with the recent declines, the unemployment rate remains above FOMC participants' estimates of its longer-run normal level," said Yellen.

"Labour force participation appears weaker than one would expect based on the ageing of the population and the level of unemployment.

"These and other indications that significant slack remains in labour markets are corroborated by the continued slow pace of growth in most measures of hourly compensation," Yellen concluded.

All eyes are on the Federal Open Market Committee (FOMC) and when it will begin to lift interest rates and tighten monetary policy further as the US economic recovery strengthens.

It has already cut the value of its vast bond-buying quantitative easing programme three times to $55bn, down from its peak of $85bn.

But Yellen said that there was no imminent risk of a hike in interest rates.

The Fed has already slashed its 2014 growth forecast to between 2.1% and 2.3%, down from a previous estimate of 2.8% to 3%, because of the bad winter weather.