Fed Chair Janet Yellen dropped a strong hint Friday that an interest rate hike is on the way later this month.

While leaving just enough wiggle room in case conditions should change, the central bank leader said economic improvements of late will be a big part of the discussion at the March 14-15 Federal Open Market Committee meeting.

"We currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect," Yellen said at a speech in Chicago, according to prepared remarks.

"Indeed, at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," she added.

Yellen noted that core inflation — excluding volatile food and energy prices — is at 1.7 percent, just below the Fed's 2 percent target, while job creation is growing ahead of the pace needed to sustain the 4.8 percent unemployment rate. She also said global economic risks had receded and believes the Fed is not behind the curve on rates.

Yellen's comments are not likely to come as a surprise to a market that has been bracing this week for a coming Fed move. However, the remarks will confirm a growing feeling, brought on by comments from multiple other policy makers, that another hike is on the way.