Federal Reserve Chair Janet Yellen, in prepared remarks ahead of what may be her last appearance before Congress as head of the central bank, somewhat gloated at the steadily brightening picture for the U.S. economy she has left behind for Jay Powell (while downplaying the risks of financial instability).

"The economic expansion is increasingly broad based across sectors as well as across much of the global economy," Yellen said in prepared testimony to the bicameral Joint Economic Committee on Wednesday in Washington.

"I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes."

In her statement, she echoed the same phrasing as Powell used yesterday, that she expects the Fed to continue gradually raising interest rates and trimming its balance sheet.

However, with stocks trading at record highs, Yellen downplayed the threat of financial instability, dropping the 'c' word in a completely reassuring Bernanke-esque manner...

"Although asset valuations are high by historical standards, overall vulnerabilities in the financial sector appear moderate, as the banking system is well capitalized and broad measures of leverage and credit growth remain contained," she said.

While admitting she had no idea still if low inflation was transitory, Yellen urged Congress to address the two issues undermining the potential for faster economic growth in the U.S.: the decline in the size of the U.S. workforce relative to population, and disappointing levels of productivity growth.

"Congress might consider policies that encourage business investment and capital formation, improve the nation's infrastructure, raise the quality of our educational system, and support innovation and the adoption of new technologies,'' Yellen said.

Full prepared remarks below (hearing is set to start at 10amET):

Chairman Tiberi, Ranking Member Heinrich, and members of the Committee, I appreciate the opportunity to testify before you today. I will discuss the current economic outlook and monetary policy.

The Economic Outlook

The U.S. economy has strengthened further this year. Smoothing through the volatility caused by the recent hurricanes, job gains averaged about 170,000 per month from January through October, a somewhat slower pace than last year but still above the range that we estimate will be consistent with absorbing new entrants to the labor force in coming years. With the job gains this year, 17 million more Americans are employed now than eight years ago. Meanwhile, the unemployment rate, which stood at 4.1 percent in October, has fallen 0.6 percentage point since the turn of the year and is nearly 6 percentage points below its peak in 2010. In addition, the labor force participation rate has changed little, on net, in recent years, which is another indication of improving conditions in the labor market, given the downward pressure on the participation rate associated with an aging population. However, despite these labor market gains, wage growth has remained relatively modest. Unemployment rates for African Americans and Hispanics, which tend to be more sensitive to overall economic conditions than those for whites, have moved down, on net, over the past year and are now near levels last seen before the recession. That said, it remains the case that unemployment rates for these minority groups are noticeably higher than for the nation overall.

Meanwhile, economic growth appears to have stepped up from its subdued pace early in the year. After having risen at an annual rate of just 1-1/4 percent in the first quarter, U.S. inflation-adjusted gross domestic product (GDP) is currently estimated to have increased at a 3 percent pace in both the second and third quarters despite the disruptions to economic activity in the third quarter caused by the recent hurricanes. Moreover, the economic expansion is increasingly broad based across sectors as well as across much of the global economy. I expect that, with gradual adjustments in the stance of monetary policy, the economy will continue to expand and the job market will strengthen somewhat further, supporting faster growth in wages and incomes. Although asset valuations are high by historical standards, overall vulnerabilities in the financial sector appear moderate, as the banking system is well capitalized and broad measures of leverage and credit growth remain contained.