Yellen said supply chain issues and shortages were the main factor driving up prices during the pandemic, but conceded that stimulus spending could have played a role as well.

"It may have contributed a little bit to the inflation, but by and large, inflation was a supply side phenomenon," Yellen said, in a rare concession by Biden administration officials about the role their policies played in driving up prices.

The Treasury secretary, who leaves office later this month, said she remained convinced that the spending had been needed to prevent scarring seen after previous downturns when business closures and layoffs result in people being unemployed for long periods and wind up becoming alienated from the workforce.

Price increases were largely due to shortages of goods coming from China and other countries that had also shut down, which left automakers and others with insufficient semiconductors and other components to produce goods.

Yellen said there had not been much progress in lowering prices in recent months, but she remained convinced that the U.S. was on a "downward path."

She said the labor market had cooled but was in a good state, and recent U.S. economic data suggested that interest rates could remain higher than people had expected.

But she said there was also increased uncertainty about the future of economic policies as President-elect Donald Trump prepares to take office on Jan. 20.

Overall, she said, the U.S. economy was doing very well, with solid consumer spending and investment despite higher interest rates.

But she said it was imperative to put fiscal policy on a sustainable course, and added that moves to derail the modernization of the Internal Revenue Service could result in an $800 billion hit to the deficit.