Federal Reserve Chair Janet Yellen said Friday that the lack of inflation has been an unexplainable "surprise," while the Fed's removal of stimulus is "working well."
"We've had a series of weak, soft readings on inflation, core inflation, beginning in March and the reasons for that are not immediately clear," Yellen said. Reasons for low inflation were "pretty understandable until this year. This year has been a surprise."
Yellen was speaking on "Monetary Policy Since the Financial Crisis" at a National Economists Club dinner in Washington, D.C. She did not address specific changes to future monetary policy or recent speculation about whether she will be reappointed as Fed chair.
The central bank began this month to reduce its balance sheet, a move that reverses a massive stimulus program begun in the wake of the financial crisis. The Fed also raised its benchmark interest rate twice this year, and markets widely expect another rate hike by the end of the year.
"The process of removing accommodation is working well," Yellen said Friday. "I believe that influencing interest rates should continue to be our primary monetary policy lever."
Yellen added that the unconventional monetary policy tools the Fed used in an effort to stimulate the economy in the wake of the financial crisis would remain an option for the central bank if needed.
In Yellen's last major speech at the end of September, the Fed chair said "persistently easy monetary policy" might have "adverse implications for financial stability."
Monetary policy could shift next year if President Donald Trump replaces Yellen when her term as Fed chair ends in February 2018. The vice chair position is also open after Stanley Fischer resigned effective a week ago.
Trump has indicated he would make a decision on a new chair by Nov. 3.
Trump may nominate both current Fed Governor Jerome "Jay" Powell and Stanford economist John Taylor to central bank leadership, according to a Fox Business News report Friday. The report cited an interview with the president set to air in full on Sunday.
White House press secretary Sarah Huckabee Sanders acknowledged that both men are "under consideration" for the job but Trump "hasn't ruled out other options." Trump has said Yellen is still under consideration for reappointment.
A CNBC Fed Survey published Friday morning found Wall Street overwhelmingly believes Trump will pick Powell to be the next Fed chair. However, respondents would prefer Trump reappoint Yellen.
— CNBC's Jeff Cox contributed to this report.